Conducting international mergers and acquisitions is always fraught with various kinds of challenges, ranging from legal and ending with cultural ones. Needless to say, these challenges have become an order of magnitude greater after the spread of the global coronavirus pandemic. All participants in M&A transactions have already managed to feel this. Therefore, in this material, we would like to dwell in more detail on the difficulties that arise during the conclusion of international business purchase and sale transactions during a pandemic.
Features of the conclusion of the international M&A transaction during COVID-19
It is quite difficult to ensure that all stages of the transaction are completed on schedule during a pandemic. Therefore, both buyers and sellers need to adapt the processes to new conditions. For example, it would be appropriate to hold meetings to discuss the terms of the transaction in a familiar format, face-to-face, online.
New due diligence format
However, with the implementation of comprehensive due diligence of an international company before its purchase, difficulties may arise. The pandemic has spurred many changes to the legislation governing this procedure, and adjustments continue. Therefore, due diligence should be tailored to the particular target company. The impact of COVID-19 on its operations, financial condition, customers, suppliers and personnel should be taken into account.
Be sure to check stocks or shares in the acquired company. To do this, you need to request and study all the minutes of general meetings of shareholders, boards of directors, and other management bodies. If corporate documents are not drawn up correctly, there is a risk that transactions with shares of the company itself may be challenged. This risk is small if the company has always belonged to one owner, but if there were several owners, it increases.
The most appropriate option for carrying out the due diligence procedure is to invite experienced specialists to ensure the correct preparation and full compliance of documents with the law before signing an agreement on company sale.
Carrying out due diligence of a company before buying it will require preliminary preparation even more thorough than before the pandemic. Depending on the type of asset, buyers may agree on a preliminary audit as a temporary measure. Then you can eliminate the inaccuracies and make the necessary adjustments already in the process of finalizing the final agreement.
How to correctly evaluate assets during coronavirus
Valuing assets might be a difficult process when uncertainty reigns in the market. The key will be to determine the purchase price. An assessment of the impact of coronavirus on an acquired international business should be carried out at the initial stage to ensure that the buyer is satisfied with the proposed purchase price.
Any estimate has to be based on the purchase price adjustment. The form of any adjustment may require careful analysis with respect to COVID-19.
At the initial stage of negotiations, the parties should focus on the issue of enforcement and/or termination of contracts in connection with significant reservations about adverse changes, especially with respect to key contracts.
It is important to understand that a correctly drawn up and concluded sales contract eliminates the risks associated with the possible recognition of a business purchase and sale transaction invalid.
Legal advice on revising a contract with foreign partners will provide orientation on what points attention should be paid to in contractual agreements and how to renegotiate an agreement with a foreign partner.
Competent and experienced IQ Decision UK specialists provide legal support for international M&A transactions. If you need more detailed information, you can order advice on the process of concluding international M&A transactions.