Business readiness

Acquisitions or Disposals

What are Acquisitions or Disposals?

The documentation of acquisitions or disposals encompasses all details of the sale or purchase of an equity stake by your group companies.

The documentation of acquisitions or disposals includes financial information on the sale or purchase of controlling equity interests by your company and its group entities to or from third parties. It includes all the legal documents related to the transactions and internal and third-party reports that assess the impact of a transaction on your company’s performance.

It covers:

  • Sale or Purchase Agreements: Legal contracts that contain the details of an equity sale or purchase transaction between your company and a third party
  • Investment Committee or Board Presentations: Documents that contain the financial costs, benefits and other details of the transaction including approvals
  • Financial Reports: Documents that forecast the impact of a transaction on the future financial performance of your company
  • Third-party Expert Reports: Documents that assess the costs or benefits and risks associated with the acquisitions or disposal

Why are Acquisitions or Disposals important for business today?

The documentation of acquisitions or disposals enable your company to:

  • Review the strategic rationale for past acquisitions or disposals
  • Determine your company’s controlling equity interests across different companies
  • Assess the potential synergies and/ or benefits that your company can achieve from the acquisitions or disposals
  • Evaluate the potential financial, operational and administrative risks in the acquisitions or disposals
  • Gain visibility into the legal obligations and terms and conditions of the acquisitions or disposals

Why is it important for an event tomorrow?

Agreements with limiting clauses are important for an event tomorrow, as they help:

  • Evaluate your internal processes related to the issuance and transfer of an equity stake to a third party
  • Assess the risks and opportunities related to an acquisition or a disposal
  • Measure the credibility of the financial models developed by your company to validate the financial benefits of an acquisition or a disposal
  • Determine equity interests of third parties in your group companies and profit-sharing arrangements
  • Assess the historical acquisitions or disposals by your company, along with their valuations and multiples
  • Measure the impact of an acquisition or a disposal on your company’s growth over the years
  • Assess the capabilities of your company in closing an acquisition or a disposal at an optimal price

Pros of addressing Acquisitions or Disposals

  • Increases transparency of the terms and conditions related to the acquisitions, or disposals
  • Helps leverage historical valuations for future transactions
  • Assists in benchmarking the benefits accrued from an acquisition or a disposal, compared to its value

Cons of not addressing this topic

  • Makes it difficult to determine the impact of an acquisition, or a disposal on your financial performance
  • Increases the time and cost of due diligence for both internal company management and potential investors.

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