Mergers & Acquisitions
Henry Towers advises you in the strategic growing decisions of your company. We can help you quickly maximize your business value, raising the capital, to accelerate your investments. All these services require a trusted business partner. We aim to help you focus on your business while keeping you safe and compliant, we make it easy to do business with us.
No matter what you are looking for with the strategy, It can be seeking to achieve economies of scale, cost reductions, get greater market share, increase synergies, or new niche offerings, we will provide the legal assistance you need to make it successful.
Our experts understand the full complexity of deal issues, capital structures, and strategies. Hereto we have design a simple process to deliver high strategic services without losing your focus on the business. It is required to play very good tactics while implementing the agreed strategy towards the target. At henry Towers we do all this for you, we want to work for you and not the other way. We are proud to serve you.
Information gathering and context understanding of Mergers & Acquisitions
Our team of experts will be working with you and your teams to understand the business context, objective and any other information, so we can assess properly the strategic alternatives, targets and recommendations for you and your business. Getting a comprehensive understanding it is critical so we can coordinate with the other areas potentially implicated.
Process execution for Mergers & Acquisitions
Henry Towers experienced advisors will perform all the required actions to fulfill with the agreed strategy, in order to achieve the expected results. We include:
- Business evaluation
- Preparation of a confidential information memorandum
- Identification and discussions of prospective buyers
- Providing negotiation of purchase and sale agreement and other deal-related agreements
- Assisting with due diligence
- Resolving transaction issues throughout the process
- Closing of the deal
We will be delivering expected results and defending your and your business interests, while keeping you safe and compliant.
We also advise you in case of the acquisition of a company is required.
Report during the management of Mergers & Acquisitions
In accordance with the strategy we will elaborate a communication plan with you so we inform you and your team about the progress made on the assignment, and support you during the complete process until closing the deal.
Characteristics, legal nature and form of the contract of sale of company
The configuration of the negotiation type is determined by the specificity of the transmitted object, the company. Only when what is transmitted is the "unit of economic exploitation" (Civil Code) or "productive unit" (Insolvency Act) may there be a sale of the company. If only a series of patrimonial elements in static situation is transmitted prevented to start the activity immediately the activity there is no sale of the company.
The legal title that connects the entrepreneur with the company cannot be absolutely rejected to the property since the immaterial elements are not susceptible of legal domination, reason why it is spoken of ownership of the company that is what it is acquired in the sale.
The cause and modes of transmission, as stipulated in the Civil Code, by placing the company as a new category of unitary object of law, is, respectively, the unit of negotiating cause (a single business) and through a plurality of modes of Delivery according to law (principle of unit of title-various modes of translation).
Compulsory content is a series of obligations to do and not to make that is constructed as a device to deliver effectively to the buyer with the same expectations of profitability that had the transferent.
The commercial nature of the object of sale (company) is based on the commercial nature of the purchase contract of the company. The point of connection with the "acts of commerce included in the Code" is not in the scheme of the sale (which is already detailed in the CC) but in the special nature of the object of sale: its legal expression and the merchant activity that Develops (against others who defend their civil nature in cases in which the buyer does not acquire with the intention of reselling).
The form of the contract of sale of company is determined on the basis that due to its commercial nature and lack of legal provision on its form, is not subject to essential or constitutional formality, but for the sake of legal certainty it is recommended the formalization of this contract in Public deed, including the inventory of the terms that form it, apart from the transmission or delivery of certain assets of the company (such as real estate). On the other hand, the sale and purchase or purchase of companies in the insolvency proceedings also requires, in advance, the judicial order approving the agreement where the sale of the company or the liquidation plan is proposed that necessarily contemplates it.
Special legal regime of the contract of sale of company: the obligations of the seller.
The special rules governing the mandatory content of the contract are:
- Obligation to deliver
- The company will be delivered through various modes of translation (principle of unit of title-various modes of translation).
What should be delivered?
The determination of the assets to be delivered to the buyer (or acquirer), based on economic and legal criteria, which must constitute "the instruments necessary for the exercise of the profession that are an integral part or belongings of the company." For its part, the Insolvency Law gives economic-functional interpretative criteria to determine essential assets in the object of transmission: those that determine the functional or productive ability, which is the delivery of goods and rights in order to ensure the continuity of the activity Company if applicable. Whether or not the inventory is annexed to the contract, the transferor must deliver all essential elements, material and immaterial of the company, necessary for the acquirer to continue normal business activity at least under the same legal conditions and profitability. Otherwise it will be a simple sale and not a sale of a company. In the same way, the obligation that is subtracted from the contract is to deliver the company, but not everything that was detailed in the inventory (unit of title).
How should each item be delivered?
- Real estate: public deed and Property Registry.
- Movable goods: traditio in any of its forms (material delivery, symbolic or made available).
- Intangible industrial property (trademarks, patents, names, designs ...) no longer require a valid document in the Spanish Patent and Trademark Office, only a private document.
- Intangible intellectual property (photographs, texts, software, audio ...) is transmitted either by the transmission of the copyright or by the transfer of the use license (with permission of the copyright owner).
- Local business with landlord title: for assignment of the lease or sublease without the consent of the landlord but notifying him within one month.
- Assignment of credits included in securities: (security value = effect [bills of exchange, promissory notes and checks]) according to the circulation rules of each type of security:
- Bearer securities: mere delivery.
- Titles to order: endorsement (signing the holder on the back of the document).
- Direct nominative securities: delivery and notification of the assignment to the debtor (and even collaboration with the debtor). [Article 357 Code of Commerce]
Assignment of credits not incorporated in securities: notification to the debtor of such assignment (although the presumption of the same is discussed if the transfer of the company is registered in the Mercantile Register).
Contracts in progress with third parties: those essential for the activity of the company are transmitted either by subrogation (the will of both parties and the third - although the Supreme Court in a judgment did not consider necessary the third) - or Automatic when so provided by the legal modality of the contract (labor contracts with commercial agents or insurance).
De facto relationships: either with persons or with the knowledge and operation of technical know-how or with the commercial organization structures or with the clients, the seller's taxation (transferor) is legally articulated in obligations of not doing and to do (atypical obligations).
Accounting books: the transferor must keep them as a deposit for six years from the last entry and must make them available to the acquirer who has a right of display based on good faith.
Labor debts (including dismissals or early retirements, in favor of both the worker and the social security): the assignor and the acquirer are jointly and severally liable for three years from the assignment of the company [article 44 Workers' Statute and General Law of The Social Security]. The EEC Directive empowers Member States to exempt creditors from companies in solvency crisis from liability for work-related debts in order to encourage transmission as a possible way to achieve the flow.
Tax debts: As a general rule, those that happen for any concept in the ownership or exercise of economic activities due to the tax obligations contracted by the previous owner and derived from their exercise [General Tax Law] are jointly and severally liable. However, this is not applicable when they are acquired within the bankruptcy procedure holdings belonging to a bankrupt debtor or when the acquirer has requested the tax Administration to certify the debts, penalties and liabilities derived from the exercise since it will only respond for the concept that is reflected in the certification.
Other debts: The doctrine propose several solutions but they are not specified in the law. For this purpose, articles 1255 and 1205 of the Civil Code are used: The parties, under the freedom of contract, can agree to the contractual debts (not the extra-contractual ones due to fraud or fault of the transferor). This pact according to majority doctrine and jurisprudence must be expressed, and in any case the pact of assignment of debts only produces inter parties effects, legitimating only the cumulative assumption by the acquirer, but not the release of the transferor, only possible if they consent the creditors (Producing a novation). In these cases there are many peculiarities, so we expose some below:
- Debts for community expenses: In order to avoid the need for community consent, the Horizontal Property Law requires the registration in the Property Registry of the transfer of the property to be certified free of debts or a document detailing the That exists, so that later either the former owner enters the money or the new owner agrees to pay it.
- Debts for services of a commercial agent: According to agreement between buyer and seller. If there is no agreement there are several interpretative options (the first one was who had the debt / the new one is who continues with the company - as well as after three years of solidarity debt in labor).
- Debts with reservation pact of dominion: The peaceful possession of the thing is transmitted and a novation is carried out by assumption of debts.
Obligation of sanitation
The transferor must carry out the reorganization of the company (article 1474 of the Civil Code), being responsible only if there is eviction or vice in the whole or most part, not in singular elements. However, if the vice or eviction affects an essential element for the continuity of business, the transferor must remedy it (Article 39 TRLSA).
Special obligations: advice to the buyer and prohibition of competition
The transferor imposes a series of obligations to do and not do with the objective of effectively delivering to the buyer the company with the same expectations of profitability that it had for the transferor.
The obligation to do consists in the communication to the acquirer of the necessary knowledge and information on the technical procedures of production (know-how) and everything that configures the commercial organization of the company (strategies, distribution networks, studies, lists ...) of So that it is placed in a position to be able to carry out an adequate operation (notifying customers, suppliers ...), guaranteeing the continuity of the company [Insolvency Law]. In addition the transferor must communicate to the third parties by means of public announcements or even to the legal representatives of the workers by means of direct notification.
The obligation not to do is to abstain from being part of the competition, to create the economic and legal conditions so that the acquirer can receive and enjoy the elements and relations of the company. Before legal silence the doctrine alleges the principle of contractual good faith (1258 of the Civil Code and 57 Code of Commerce) and concurrencies. In addition, this obligation is only temporary until the acquirer's business activity is reasonably consolidated, which will be determined by the judge according to material, spatial and temporal criteria.
Buying and selling company
The purchase and sale of a company in competition is determined by the Insolvency Law that establishes a series of legal rules on the subject of the contract and its mandatory content:
- The object must necessarily be the whole of the company or certain productive units of the same.
- The transferor must place the acquirer in a position to continue the business activity.
- The acquirer is legally obliged to assume the continuity of the business activity, as well as to take charge of the payment of the credits of the creditors in the terms expressed in the agreement or the plan of liquidation of the contest.
- In all cases the transfer of the company must be heard by the legal representatives of the workers.
What is my business worth, and how is it valued?
There are a number of ways to value a business. We use the “Market” approach to estimate the “enterprise value”. As this approach is more art than science, it involves looking at several factors, both quantitative and qualitative, that will impact the value of your firm. The main factors affecting the value of your firm include:
- Length of time in business
- Type of service offerings
- Quality of infrastructure
- Corporate structure
- Client diversity and concentration
- Compliance and legal history
- Revenue run rate
- Revenue growth rate
- Rate of gross & net profits
- Sector appropriate billing rates
- MARKETS SERVED
- Type and size of market
- Client retention and references
- Growth industries
- HUMAN RESOURCES
- Strong management
- Well-trained sales and service staff
- Solid recruiting process
- High retention and low staff turnover
What can I expect once I merge or sell my business? What can my employees expect?
It is important to remember that we need to keep a proper perspective and embrace the challenges that lay ahead. More than likely, there will also be stressful times. We can’t decide sometime on what is happening but we do have control on how we are going through it. Mergers can be difficult for some people. It is important to be realistic, to remain calm and focused and to prepare all involved for some bumps in the road. In time, most of us adjust. It is easier if integration is done thoughtfully and with effective communications with both the buyer’s and seller’s staff.
How long does it take to complete a sale?
It will take us about 2 weeks once we have collected all information to start the marketing process. We produce several documents al approved by you as a client, along with potential buyers list. Once we start to publish your offer, it might take from two weeks to several months before a potential buyer might show interest. Once the seller has provided us with the material to market the company, it takes about 10 days to start the marketing process. We first produce a Blind Overview, Potential Buyers List, Confidential Offering Memorandum and Trailing Twelve Month financials which are all approved by the client. The next period of the process is called the due diligence period where the buyer thoroughly examines all aspects of the company being purchased. Depending on the size of the selling company this process could take anywhere from two weeks to two months.
The last part of the transaction involves the production and negotiation of the agreements and its terms. This process could take two to four weeks depending on the experience levels of the lawyers involved on both sides.
In summary, the sale can take anywhere from three to nine months and sometimes longer to complete.
How can I build value into my firm to prepare it for eventual sale?
There are many key elements to build value for your business. Here are some of the most important value builders:
- SIZE: The bigger the better, larger companies with multiple offices are in greater demand as there are fewer of them.
- HIGH GROWTH RATES: This will show buyers that they can potentially recoup their investment faster, so they can pay you more.
- SPECIALIZED SERVICES: Niches usually command a premium, as buyer needs your expertise to grow this sector. And they often have higher margins.
- HIGH GROSS MARGINS: This gives the buyer more flexibility to operate the business and maximize results, hereto more investment that potentially could go to you.
- DIVERSE CUSTOMER BASE: Minimizing business risk by ensuring your business is not captive of a few clients.
- GOOD MANAGEMENT: Good investment from you side will save money to the buyer, investing on management will also help you maximize your value, as reduces buyer’s required investment.
- SOLID INFRASTRUCTURE: This can lower investment costs for buyer.
- EMPLOYEES: This is always preferable to independent contractors.
What can an M&A advisor do to improve the business valuation?
Preparing a business for sale and improving Business valuation is one of the areas in which a competent Mergers & Acquisitions advisor can make a huge difference. Businesses typically spend an inordinate amount of time setting up and using accounting practices that reduce the owner’s tax liabilities. CPAs use various business ownership structures and techniques to defer/reduce the revenues or accelerate/inflate the expenses to help business reduce its tax burden. The unforeseen side effect of this exercise is that, to a potential acquirer, the profitability of the business may appear much smaller than what it really is. Here is where our advisor will help you maximize the reality of your business value.
Our experts understand the full complexity of deal issues, capital structures, and strategies. Hereto we have design a simple process to deliver high strategic services without losing your focus on the business.
Tax Division Manager at Henry Towers