Acquisition Agreements - The Key Accounting Essentials for Lawyers
With high values at stake, difficulties in reaching agreement on the completion mechanism and sale and purchase agreements (SPAs) can often frustrate and sometimes derail an otherwise successful transaction.
Without definitive rules or standards on completion mechanisms, parties to a transaction often cite ‘market practice’ when negotiating how the initial offer price is converted into the final equity value paid for a business.
This course aims to provide lawyers with an understanding of the key accounting issues to be covered in business and share purchase documentation.
What You Will Learn
The key issues covered by this course will include:
Enterprise Value v Equity Price
- Bridging between headline price and price paid/received on deals
- What does ‘cash free, debt free, and a normal level of working capital’ really mean?
- Interpreting ‘cash’, ‘debt’ and ‘working capital’ from a buyer v seller’s perspective
- How accountants establish ‘normal working capital’
- Factors to consider for off-market deals v multi-party processes (for sellers and buyers)
- The accounting hierarchy:
- Specific accounting policies - how to draft meaningful specific accounting policies
- Consistency - with what?
- Defining GAAP and the risk of relying only on GAAP
- Tips regarding the mechanisms and strategies for the preparation and agreement of completion accounts
- Dispute resolution considerations
- Timing considerations
- Practicalities of who prepares and who reviews
‘Locked Box’ Deals
- How locked box deals differ from conventional price adjustment deals
- The nature of locked box accounts compared with annual accounts or completion accounts
- ‘Leakage’ and ‘permitted leakage’
- The value accrual ‘ticker’
- Purpose and content
- Differences between management accounts warranties and statutory accounts warranties
- Post accounts date events: material adverse change warranties
- Locked box considerations
- Picking a measurement basis
- Pitfalls of relying on ‘EBITDA’ or ‘profit’
- Treatment of non-recurring items
- Post-completion acquisitions
- Continued involvement of sellers
- Synergies: ensure comparing ‘apples with apples’ in mechanics of earn-out
- Most common areas of dispute
- Strategies to avoid disputes pre-deal
- Dispute resolution post-deal
Top Tips to Protect Client Value
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Please let us know if you wish to be notified when new dates are added for this programme