Thorough Due Diligence leading to Better & Faster Negotiations
Background:
A Company from Bangalore intended to acquire 100% stake of the target Company engaged in the food industry and having manufacturing facility near Pune. Before commencing the due diligence, both parties had already initiated negotiations on the transactions points. The target company had expressed reservations of the lengthy draft of Sale Purchase Agreement (SPA) and on those grounds, had almost rejected the entire SPA.
Challenges:
While the intent was to draft a simple, crisp yet comprehensive SPA, unforeseen pushback was received from the target company who did not support the due diligence. Critical information and important documents were not made available, which posed complications at various instances.
Strategy:
Various relevant documents were obtained through online research, from government websites and from the Registrar’s office. Through an interaction with the top management officials of the target company, the expectations regarding language and style of drafting the SPA were vigilantly noted. Resultantly, a clear, concise and brief draft was prepared as per the expectations of the target company.
Impact:
Certain unrevealed compliances were discovered by adopting an independent search strategy. It became possible to envisage the cost and time involved in meeting the recently discovered compliances.
The acquiring company was also able to gain a holistic view of the target company. Eventually, an inclusive, yet straightforward SPA was drafted that conformed to the expectations and was approved immediately by both parties.