Mergers and Acquisitions (M&A) is commonly known as a set of tasks that are aimed at smoothly merging one company with another or several enterprises into one. Such transactions can be signed for a wide variety of purposes. For example, in order to expand an existing company, open new branches in other cities or countries, to optimize production etc. Most often, this helps to solve such a problem as a poor system of product delivery to the consumer, for example, with an increase in the volume of goods output. All these make M&A one of the most popular types of business transactions.
An M&A deal is a great opportunity to get new partners and expand your business. For example, in Serbia, where market is quite accessible to both foreign and local companies and individuals.
Our staff lawyers of IQ Decision UK have recently analyzed the M&A regulation in this country in the Southeast Europe, and in this article, we share some of the outcomes with our readers.
A balance of interests
A successful M&A transaction is a balance between the interests of sellers and buyers. Buyers are interested in what added value they will gain from the transaction and how much grow their capital will grow. Sellers, in their turn, are interested in how much they will gain from the transaction, and how they will affect the development of the acquired company in the future.
In Serbia, if several businesses have decided to merge, then this solution can be realized in different ways. The most common way is to buy company shares either from the owners, or on the stock exchange. It depends on what type the joint stock company belongs to.
An alteration of status is another way to buy company shares in Serbia. What does it mean? This means merging in various forms, such as through the acquisition, separation or formation of new structures.
Small Talk First
In this jurisdiction, it is normal to conclude sales contracts between companies for the purpose of assets aquisition. A simple maneuver, and one company transfers ownership of its assets to another.
The deal normally begins with a sort of a ‘small talk’ before getting down to business. In this case under ‘small talk’, the signing of a non-disclosure agreement should be understood.
This is an important starting point. A due diligence check is then performed. And only after these steps do the parties begin the negotiations, where the specific terms of the transaction are discussed. The usual transaction period is about three months, but it happens that it drags on for a longer period.
If you intend to purchase a company in Serbia, IQ Decision UK lawyers can conduct a comprehensive audit of a Serbian counterparty upon your request.
How to buy a business in Serbia?
You can do this in two ways: either by buying company shares, or by buying a ready-made company as a whole. For the latter, an international company sale contract will have to be drafted ans signed.
Proper drafting of this kind of agreements are essential to prevent inaccuracies in such an important document. So, please, do not hesitate to get in touch with our IQ Decision lawyers who are always on standby to provide you with relevant legal advice on M&A in Serbia.
The buyer who purchases property on a contractual basis will be liable for debts associated with the property, together with the seller.
When acquiring a business or property by changing the status, the buyer will be obliged to take over the seller’s employees along with all applicable general acts, which must remain valid for at least one year after the deal.
Local Regulatory Bodies
The transfer of assets from one company to another, or business as a whole, may require the prior consent of Serbian regulatory authorities. Certain industries, such as banks and other financial institutions, insurance companies, brokerage companies, pension fund management associations are all supervised by the National Bank of Serbia, which has the authority to control their business activities, and issue permits to acquire shares in Serbian companies.
At the same time, investment funds, stock exchanges, depository banks are controlled by the Securities Commission.
A buyer who wants to acquire shares in a Serbian company must apply for registration with SBRA and pay up to EUR 30 of administrative fee. In case big companies merge, the merger application should be mandatory approved by the Competition Commission, and it will cost the applicant up to EUR 50,000.
To announce a tender proposal, the approval of the Securities Commission will be needed, and the buyer will pay a fee of EUR2,500 as a minimum.
The successful completion of an M&A transaction is the result of a complex process. In practice, companies often make the same mistakes, which can adversely affect the merger and acquisition transaction. Here are the top 5 of them:
- Excessive optimism of the participants and unrealistic assessment of the value of the company.
- Non-effective use of resources.
- Incorrect planning and the inability to implement a business plan.
- Ineffective organizational integration and communication difficulties.
- Lack of knowledge of local legislation.
It is imperative that both parties, both the buyer and the seller, have the opportunity to quickly use the available information resources and tools that will allow the information disclosure process to advance successfully until the logical conclusion of the transaction.
You are welcome to ask our IQ Decision UK lawyers any questions that may arise in connection with buying a business in Serbia. We will be pleased to provide comprehensive answers to these questions when ordering legal advice on the purchase of shares or a ready-made company in Serbia.