Heading the special team assigned with the task of proposing and finalising a merger/ acquisition, you very well understand that there are host of factors from the economic, commercial and legal perspective, which requir

Merger or amalgamation is undertaken for acquiring cash resources, eliminating competition, saving on taxes or influencing the economies of large-scale operations. Therefore, there are host of factors, which require consideration before initiating a merger or amalgamation exercise. A detailed list of the primary factors requiring consideration before initiating a merger or amalgamation from the economic, commercial and legal perspective is explained as follows: Identification of Parties: Will one or more businesses be transferred to an existing firm or a newly formed entity? Consider drafting heads of terms, do you require a confidentiality agreement? Do you require an exclusivity agreement? Review financial liability of the parties - undertake appropriate searches and enquiries. Due Diligence: Carry out legal, commercial, tax and financial due diligence on the parties entering into the transaction. This will help in identifying risk areas along with any necessary consent you will need to obtain. Any third-party consents required?: Ascertain if any third-party consents or no objections would be required such as from banks, business contracts, partner/shareholder consents. These should emerge from due diligence. Consider also regulatory consents/licences that may be required. Taxation: It will be necessary to ascertain the most suitable tax structure for the transaction and, in particular, the way in which the consideration should be structured, at an early stage, therefore consider consulting tax advisors. Risk: Sharing of risk - What kind of indemnities/warranties/representations be considered? Should there be a cap on such indemnities and warranties? Will the transaction impact on existing loan/finance arrangements?: Check loan documents and constitution documents to see whether any proposed borrowing would be a breach of any existing funding. What will happen in relation to third party funding of the Seller business? Confirm that there are no restrictions on the disposal of the target business or any of its assets. How will the merged business be funded? Existing Charges/Modifications over the assets to be acquired: Are there any mortgages, charges or debentures over any of the business assets? If yes, obtain copies and consider how they are to be satisfied/discharged. If there are floating charges, obtain certificates of non-crystallisation / release. Whether there is any pledge on shares? Obtain a Search Report from a Practicing Company Secretary. Guarantees and indemnities (bank or other): Has the Seller given or received any guarantees or indemnities in relation to the business? If yes, then obtain copies (including details of arrangements) and consider in particular, how to ensure the business continues to have the benefit of relevant guarantees. Licences: Will the Buyer have all other licences which it needs to operate the business? Supply contracts: Will supply contracts be transferred or need to be terminated? How will this be done? What IP is used in the business?: Obtain a full list of trademarks, service marks, patents, designs, domain names, copyright and other registered and unregistered intellectual property used in the business. Carry out trade mark and patent searches as may be appropriate through an IPR Attorney.