Completion is often the climax of the M&A process, but not necessarily the end. It’s generally a meeting of all the key players and/or their lawyers, to sight, sign off on and exchange the required documents and other things – often including a cheque and the keys to the front door, for example.
Good deal staff will ensure that this meeting is as anti-climactic as possible. All the contracts should have been agreed, if not signed beforehand and nothing should really be left for this meeting unless there is a very good reason to do so. That’s particularly important, as these meetings tend to be surprisingly emotional for the principals and not a good time to make decisions.
When put in command, take charge! – Gen. Norman Schwartzkopf’s Rule 13
I generally advise principals that the actual completion should take place at the premises of the business being acquired/sold (the head office if there’s more than one site). This allows the principals to address the key staff immediately after the completion meeting.
Generally, the vendor principal will let the staff know what’s happening from his perspective, and why, and take the opportunity to thank them for their service.The acquiring principal can then be introduced to being the process of change of control and/or integration as has been planned prior to completion (hopefully!).
A key exception to the handover of control may be ‘Conditions Precedent’ (CPs) to the sale. These are specific terms written into the Sale & Purchase Agreement (SPA) to allow for particularly sensitive actions to be take after the deal is committed, rather than before. The principals may choose to hold the completion meeting either before or after the CPs are satisfied.
I commonly use CPs for at least two sensitive subjects – customers and staff. Vendors don’t generally want buyers to talk to either of their customers or their staff until they’re sure that the deal is going to complete. And buyers don’t generally want to hand over the consideration payment until they’re confident that the staff they want are going to come along for the ride, and the customers aren’t going to head for the exits.
By negotiating some very specific conditions around these issues that both sides are confident of, we can allow the deal to move forward before we’ve actually covered off the bases. For example:
- We agree that after signing the SPA contract (but possibly before the deal consideration is paid and/or ownership transfers to the buyer), the buyer will offer new contracts to the staff, and if at least 85% of the staff agree to sign their contracts, the deal will complete.
- We agree that after signing the SPA contract (but possibly before the deal consideration is paid and/or ownership transfers to the buyer), the buyer will visit the top 10 customers along with the vendor, and if not more than 2 of those customers suggest they might leave or renegotiate their contracts, the deal will complete.
This is a complex area of both law and negotiation, and another area where it can be very helpful having a corporate advisor on your side, whether you’re buying or selling. Give me a call to talk about some of the experience we’ve had with these, and how I might be able to help you, to0!