Corporate Acquisitions - The Acquisition Process and Legal Considerations from the Perspective of the Acquiring Party

Abstract: The amount of acquisitions has grown rapidly in Sweden during the past two decades and are today a very important strategic and financial decision for many companies. A corporate acquisition could also be a very big financial risk for the acquiring party. This thesis researches the process of corporate acquisitions from the perspective of the acquiring party with a focus on an economic analysis of law as well. To facilitate this research four research questions, that pinpoint specific areas of ensuring the interests of the acquiring party, have been used as a frame for both the research and this thesis. The thesis starts off with an examination of how the common acquisition process is shaped and an investigation of applicable legislation to the process of corporate acquisitions. This thesis shows, the provisions that affect the acquisition process, and the parties of the transaction, are spread out in several acts and are not specifically designed to cover acquisitions. This can be a reason for the rapid growth among mergers and acquisitions in Sweden. Furthermore, this thesis also shows that more provisions on the branch would likely ensure secure transactions and facilitate economic efficiency in the Swedish society, seen to the business of corporate acquisitions. For the interests of the acquiring party, and how to act to ensure these in the transaction process, it is first of all important to know, as early as possible, what these interests are and how important they are in relation to other imaginable points of negotiation and discussion between the parties. This thesis looks at ensuring the interests of the acquiring party through warranties and indemnities, through non-compete clauses, through price mechanisms and finally how to ensure the interests at the time of closing. Each instrument of ensuring the interests has its own traits and while they represent different parts of the share transfer agreement this thesis also shows that they are intertwined. Gaining security of the interests on one of the four instruments, might likely lead to consequences on the other points of the agreement. However, an awareness of the detail that all risk reducing measures for the acquiring party likely is reflected on the purchase sum should be present throughout the transaction process. In general, important risk reducing means for the acquiring party are due diligence examinations and usage of warranties in the share transfer agreement. The warranties are a relatively unrestricted manner to ensure the priorities of the acquiring party. A consequence of the scarce amount of regulation on mergers and acquisitions is that the legal field itself has few guidelines to lean back on when seeking legal advice on matters of the field.