Adam Killip, Barry Smith and KPMG’s Kristan King recently hosted a webinar presentation outlining the main considerations for parties to corporate sales agreements.
During unprecedented times and a global pandemic, the sector of corporate transactions has demonstrated resilience. Thankfully, with the increasing move to remote working and the use of technology with resources like online datarooms, the ability for purchasers and their representatives to complete a deal has not been dramatically impacted.
The importance of understanding the rationale for a transaction and testing the market was discussed in the webinar, emphasising the need for certainty around motives and long-term objectives for pursuing a deal as well as the use of independent advisors to ascertain buyer appetite and credibility. The potential importance of anonymity in the market research stage to limit association with any “failed” transactions was also highlighted, as well as ensuring that sellers are fully informed as to the market’s trends to enable them to make strategic decisions.
Negotiating the price of a transaction and factoring in the value of a transaction are important considerations for both buyers and sellers. It was highlighted in the webinar that the parameters of the negotiation should be outlined at the outset, to ensure a clear view of both parties’ requirements and expectations. This allows for a range of outcomes to be considered in comparison to the current market, plus provides scope for personal views to be communicated between the parties. Like in many negotiations, there will be reluctance where there is a high risk of loss, but effective due diligence can assist in mitigating that risk through highlighting areas for enhancement and settling disputes early on in the negotiation stages.
Due diligence is something that is known to be time consuming and document heavy, so online datarooms provide an alternate forum that remains accessible and efficient at a time where the office may not be accessible for all parties involved. They have assisted in the move toward remote working and provide an element of continuity in an otherwise disrupted market. The ability to review files in this way also allows the buyer to consider in depth how the target business may integrate into their existing business, linking back to negotiation stages and transaction value. The ability to work from home to minimise interference as much as possible is a welcomed arrangement during Covid-19.