Stages of a buy-out
Stages of a buy-out

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Stages of a buy-out
  • Commencing the sale process
  • Auction
  • Initial documentation
  • Due diligence
  • Financial and tax due diligence
  • Legal
  • Other
  • Financing the acquisition
  • Transaction documentation
  • More...

Stages of a buy-out

Commencing the sale process

Once the seller has decided to sell a business, it will start the sale process by preparing an information memorandum (IM) containing detailed information about the target company's business. This may include drawing up a business plan in conjunction with management. The seller will then distribute the IM to potential purchasers.

Prior to making an offer any potential buyer is likely to:

  1. carry out initial due diligence

  2. try to line up debt finance for the acquisition, and

  3. try to enlist the support of the existing management team, or line up a new team of their own

If the sale is to be by way of management buy-out (MBO), the management team will approach the seller with its proposal.

Auction

Sales of businesses are often conducted by way of auction, particularly in markets where there is significant competition among buyers. The seller will be looking not only for a good price but also for a bidder who can execute the transaction quickly and make an offer that is as unconditional as possible. Where a business is to be sold by way of auction, the process will be a bit different from the process set out below.

The key difference is that exclusivity will be awarded at a much later stage of the process. Prior to being awarded exclusivity, the buyer will need

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