This article was originally published in Chambers Client Report in May 2005.
“An M&A is all about the allocation of risk. The vendor is concerned to maximise the amount paid for the business whilst reducing long-term risk to a minimum. The purchaser and its financers will be weighing the complex interrelationship between price, knowledge of the business being purchased and future profitability. That allocation of risk is eventually reflected in the Sale and Purchase Agreement – in particular the compensation paid for the business and the warranties as to the past conduct and profitability of the business…”