Whether it is a stock transaction or the transfer of business assets, the sale of a business is often a highlight in the life of the entrepreneur. This is true for both the selling party and the buying party. Whereas a business acquisition for the seller can amount to a long-awaited exit, an acquisition for the buyer can be part of a well-considered buy and build strategy.
Due diligence investigation to identify as much acquisition risks as possible in advance
When making an acquisition, the parties try to identify the risks as much as possible in advance by conducting a due diligence investigation. The risks that emerge from such a due diligence investigation are usually decisive for the negotiations on the acquisition price. The seller, of course, aims to realize the highest possible sales price and does not want any hassle after the sale. The buyer, on the other hand, aims to pay as little as possible for the company to be acquired and wants to be protected as much as possible against any possible losses and liabilities after the sale. Parties can work out these risks in representations and warranties and indemnities.
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The seller’s duty of disclosure
In some cases, an acquisition can still have a nasty aftermath. As a buyer you may feel you have bought a pig in a poke, for example because the seller has not shared all essential information with you beforehand. The seller may have neglected his duty of disclosure. It is also possible that the seller has violated certain representations and warranties, guaranties or indemnities.
Annulment or dissolution of a purchase agreement on grounds of hidden defects
As a seller, you may in turn be confronted with a buyer who complains afterwards about hidden defects. It is not uncommon for a disappointed buyer to attempt to rescind the purchase agreement (such as a Share Purchase Agreement or ‘SPA’ for short) or to set it aside (nullify it) on grounds of error. He may also claim damages for a breach of warranties or seek an adjustment of the purchase price. What if you believe that the buyer (often assisted by a team of professionals, such as financial experts, lawyers and/or tax specialists) could (and should) have known better and, therefore, breached his duty of investigation?
Disputes arising from the provisions of an acquisition contract
Disputes can also arise afterwards about how provisions in an acquisition contract should be interpreted. For example, a dispute may arise about whether the requirements for an additional payment on the purchase price (a so-called ‘earn out’) have been met or about the scope of a non-competition clause in the purchase agreement.
VIOTTA helps in cases of takeover disputes
In all cases where one or both parties to an acquisition have a bad taste in their mouths about a contract for which they once opened the champagne, the experienced specialists at VIOTTA Advocaten are ready to assist you. Almost every day we assist both buyers and sellers in disputes about acquisitions with a link to The Netherlands or to Dutch law. From the takeover of a scale up or medium-sized family business to the acquisition of an internationally operating group by a strategist or private equity firm. We assist clients in preventing and conducting takeover proceedings, both in court and in (national and international) arbitration. If you have any questions or need advice, please contact Arnoud Fioole or Martijn Kesler. They will be happy to help you.
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VIOTTA is a law firm based in Amsterdam, specialising in providing advice in the areas of corporate law, mergers and acquisitions, contract law and corporate & commercial dispute resolution. We advise in transactional matters and litigate in commercial disputes. VIOTTA provides legal advice to its clients on Dutch corporate law matters, such as corporate governance, board structures, directors’ duties and liabilities, joint ventures and other collaborations. VIOTTA advises purchasers, sellers, management and other stakeholders in domestic and cross-border mergers and acquisitions (M&A).