September 11, 2025 • 29 mins
In this week’s episode, Jonathan sits down with his long-term legal partner, John Andrews, for a masterclass on the legal do’s and don’ts of buying a business.
With over 250 deals completed for Dealmakers clients and three decades of M&A experience, John shares the essential legal knowledge every buyer needs — especially if you’re serious about avoiding costly mistakes.
Whether you’re preparing for your first deal or scaling up your acquisition strategy, this episode gives you the legal edge to navigate deals with confidence.
What You’ll Learn in This Episode:
- Why a Shareholders’ Agreement is Crucial — and why skipping it can cost you dearly later
- How to Choose the Right Lawyer — and why not all solicitors are qualified to handle M&A
- What Goes into a Share Purchase Agreement (SPA) — and the key clauses that protect you
- The Three Types of Due Diligence — and how each one helps avoid nasty surprises
- The True Cost of Legal Work — from fixed fees to due diligence and abortive deal risks
- Asset Purchase vs. Share Purchase — the pros, cons, and tax implications of each
- What to Expect During the Completion Process — and why most deals are now done digitally
- The Most Common Legal Mistakes Buyers Make — and how to avoid them
- How to Avoid Overpaying or Becoming a “Motivated Buyer” — and stay in control of negotiations
- Why a Strong Legal Team on Both Sides Speeds Up the Deal — and can save you thousands
If you’ve ever wondered what your lawyer should really be doing for you — or how to make sure your deal doesn’t unravel at the last minute — this episode pulls back the curtain on the legal side of business buying.
🎧 Listen now and get legally savvy:
👉 Find all episodes at dealmakers.co.uk
Links & Resources Mentioned
- Book a Clarity Call (free, no obligation) → dealmakers.co.uk/clarity
- Jonathan’s YouTube Channel → youtube.com/@JonathanJayDealmaker
- Subscribe to the Business Buying Strategies Podcast archive → dealmakerspodcast.co.uk
If you enjoyed this Q&A format and want Jonathan to do more, let him know by leaving a comment or review!
And if you’re serious about buying your first (or next) business, book your free clarity call today: dealmakers.co.uk/clarity
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:29):
Hi, this is Jonathan Jay, and welcometo Business Buying Strategies,
the number one podcast for peopleinterested in buying a business
without risking any of their own cash.
On this week's episode, you're goingto hear from my long-term lawyer,
John Andrews, who recently spoke to mymastermind audience about the legal issues
and the pitfalls of buying a business.
Yeah.
(00:49):
Yeah, just a brief background.
So I've worked with Jonathan Jay forprobably the last six, seven years.
I've been at two, three firms inthat time, and we've completed
200, 250 deals for people thathave been on the Dealmakers course.
So we're pretty well experiencedin Jonathan's methods
how these deals are done.
(01:10):
And it's been a real learningexperience over that period of time.
To share a little bit about myfirm we are a top 50 law firm.
We have offices in Manchester,Liverpool and London.
I head up the London office andall of the deal maker work is done
under my supervision in my office.
My job today is to give you a whistle stoptour on doing m and a deals the structure
(01:31):
of them, the process and really tell abit about how to engage with your lawyer.
And I know you're probably alreadykeen to have an understanding of what
these things cost most importantly.
So I'll I'll do my best to giveyou some parameters on that.
What I say is this is when you're startingout on this journey, and Jonathan will
tell you you're invariably gonna dothese acquisitions via a limited company.
So you will set up your holding company,and if it's just you being the only
(01:56):
shareholder and the only person doingthe deals, then all well and good.
You can buy an off-the-shelfcompany and leave it as it is.
What I would say to you is that at thevery outset, if there's gonna be more than
one shareholder or if you anticipate inthe future there's gonna be more than one
shareholder, then the very first documentyour lawyer should be telling you to do is
to put together a shareholder's agreement.
(02:16):
And it's a document most peopleeither don't know about, think
they'll put it off to a later stagebecause they're expensive to draft.
And I think it's not necessary.
One thing I would say to you is this,of all the documents that you'll
put together when you're doing thesedeals, if you're going into partnership
with somebody and you're gonna havemore than one shareholder, more than
one director, that the shareholdersagreement is absolutely essential.
(02:38):
And my advice is get that doneat the earliest stage possible.
Now, what does ashareholders' agreement do?
It's a private contract betweenthe shareholders and the business.
And the reason you need it is thatif you set up a limited company
and you just unlock shares to 1,2, 3 people, including yourself,
there's two consequences of that.
(02:59):
First of all, once those shares have beenallotted, you can't get those shares back.
So if those shareholders decidethat they're not gonna take
any part in their business.
If they wanna retire from the business,want no involvement in it unless
that's something you intended, theyare entitled to retain their shares.
Once they've left, they're entitledto a proportionate dividends.
(03:19):
If they've got 50% of the shares,they get 50% of the dividend.
And when you eventually exit the business,they're entitled to 50% of the exit price.
So you'll see that there are anumber of scenarios where you
would not want that to happen.
So a shareholders agreement, the firstthing it does, it says in certain
circumstances remaining shareholders havethe right to acquire those shares back.
(03:41):
And you can fix the price forthose shares a number of ways.
It could be market value, it couldbe a prefixed price or it could
even be a nominal price if thedepart shareholder is a bad lever.
So even bad circumstances that's thefirst thing a shareholders agreement does.
The second thing is a shareholdersagreement can do, is it can create
(04:01):
obligations between the partiesto it so you can set out what the
obligations of each shareholder arein participating in the business.
And this goes beyond any employmentagreement or service contract
that you might have with them.
The third thing that the shareholdersagreement can do is address the the
issue of different share classes.
Now, when you set acompany up off the shelf.
(04:22):
All shares rank equally.
So you just have one class of share.
They have equal voting rights equalproportionate entitlement to dividends.
So again, if you're gonna be quitesophisticated on the, at the beginning
of your journey, and this will be morethan one shareholder, you might want
to create different classes of share.
They're called alphabet shares.
Commonly you have class A, B, CD.
(04:43):
Creating these shares involvesamending the articles of association
or having bespoke articlesdrafted at the very beginning.
Articles of association arethe rules of the company.
All limited companies have them.
If you just buy a company off the shelf,there will be standard articles with
one class of share., If you're gonnabe sophisticated, you will acquire that
(05:03):
company and you either adopt brand newarticles on the day that you buy that off
the shelf company, or you will amend thosearticles to create the classes of share.
The reason you create classes of shareis you can then have different rights
in terms of voting and differentrights in relation to, to dividend
different rights to buy shares back.
(05:24):
Again, quite complicated at the outset,but if you are gonna go into business
and acquire businesses with a numberof colleagues, partners, whatever
you wanna call them, then creatingthese separate classes of shares,
something you wanna consider, and thenwithin the shareholders' agreement,
you can set out additional rightsas to how those shares are gonna be
dealt with in the event of disposal.
In the event of a a disputebetween the parties.
(05:46):
So shareholders agreement at the veryoutset should at least be raised with you
by any lawyer that you're gonna speak to.
And that probably brings me on tothe most important point of today.
M and a work is really specialized.
I've been doing it for 30 years.
And I can always tell when a lawyeron the other side is dabbling.
Now doing MA work is a mixtureof knowing the law, but it's also
(06:07):
really a question of experience.
I've made lots of mistakes inthe past, all lawyers have.
But you learn from those mistakes,and you also build up a commercial
awareness on these deals.
What, what feels right?
And if you don't do these dealsday in, day out, then you're not
doing the best for your clients.
So I would say this don'talways be driven by price.
Be driven by experience.
(06:28):
Price is important.
I get that.
But ultimately, a bit like buying a house.
This is a major acquisitionyou're gonna do.
You wanna get it right.
And you want a lawyer that knowshis way around the documentation
importantly from a legal perspective,but also from the point of view of
negotiation and doing the deal for you.
And I say that because there, there area number of times that we're doing deals.
(06:48):
And at the beginning of your journeyyou probably are gonna be motivated by
how much these deals are gonna cost you.
And some lawyers will spend hoursarguing one word in a contract.
And the.
What you need is a lawyer to say toyou that's, that is really important,
that, that's a deal breaker.
Or you need, or by the same token youneed a lawyer says, you know what?
(07:10):
We can let that go.
We can part that.
The chances of that actually goingpear shaped for you are fairly minimal.
So the commercial side of the negotiationfrom your lawyer's perspective is just
as important as the legal side of it.
So get a lawyer that, thatis an m and a specialist.
The other thing I'd say to you is this.
If you acquire the business and theseller hasn't got a lawyer, then make
(07:34):
sure he's getting an m and a specialist.
'cause otherwise we've got no control whothe other side is or how sensible they
will be over their their negotiations.
What I often do if I'm acting for abuyout, even for a seller, I've got
three or four lawyers that I've workedwith on a number of occasional deals.
We like working with them.
They know how we draft our documents.
They know what we will accept, whatwe won't accept, and vice versa.
(07:57):
What that does is it speeds the deal up.
It makes it cheaper because we'renot arguing over city points.
'cause more or less we knowwhat the documents are gonna
look like at the outset.
And it means ultimately thewhole transaction is less
stressful for you guys.
So having two good m and alawyers on each side is important.
And as I say, if the seller hasn'tgot a lawyer, then pushing towards a
(08:19):
lawyer that's got MA experience or.
Your own lawyer may be able to makea recommendation to who they've
worked with on the other side before.
I've gotta keep an eye time.
Moving on to the variousaspects of the transaction.
What I should come back toactually I didn't do, I didn't
see how much shareholders'agreement was gonna cost today.
Lawyers never liked sticking their neckout and say what it's gonna be for a
straightforward shareholders agreement.
(08:41):
You are probably looking at somewherebetween three to 5,000 pounds now.
Quite a big investment at the veryoutset of your buying journey.
But the cost it can save you inthe long run are significant.
I won't give you some of the examplesI've come across where shareholders
agreements haven't been put in place.
But I can tell you that I'vedone some litigation where the
(09:02):
costs were 200,000 each side.
We won the case in the end, but200,000 pounds of probably 18
months of this person's life.
So really for the sake of threeto 5,000 pounds of investment
worth making, more sophisticatedagreements, which you probably
won't want at the outset, probablyanywhere between 10 and 15,000 pounds.
But that's when you'refurther down the journey.
(09:24):
Perhaps when you're bringing in privateequity investors into the business.
You can revisit your shareholdersagreement and make it a
little bit more sophisticated.
So if we move on to the stagesof doing an m and a deal first
document is head of terms.
Generally speaking with the dealmaker deals how we deal with 'em in
my firm is we say to the client lookyou come to us with a draft head.
(09:47):
So you've had your discussions withthe with the buyer, with the seller.
Jonathan's got a template he's used,which is perfectly adequate, and
I've seen that a number of times.
You agree the price, you agreewhen the deal is gonna take
place, any special provisions, andthen you, that gets sent to us.
And we don't charge for reviewing that.
We look through it.
We often tweak the document at thatstage just to cover some points
(10:08):
that you may not have thought.
And it's really careful.
It is kept quite quite importantthat in relation to that document.
Any material terms, particularlyin relation to personal
guarantees are covered.
So what you don't wannado is start a deal.
The seller's lawyer gets instructed,and the first thing you're asked
for is a personal guarantee.
Now, Jonathan has a mantra, don't givethem, he's absolutely right about that.
(10:29):
But what you don't wanna do is spendtwo or 3000 pounds going a little bit
of the way down the line and suddenlyfind that's gonna be a deal breaker.
So all those key termsneed to go into the heads.
As I say we don't chargefor reviewing those.
And the reason we don't charge is itenables us at an early stage to make
sure the structure of the deal stands up.
It lets us price the deal at that stage.
(10:50):
At a very early stage, more or less,what that transaction's gonna cost you.
If you do want a lawyer to draft theirheads of terms generally speaking,
somewhere between two and 3000 pounds,depending upon how complicated they are.
So you can save yourself alot of time, a lot of cost.
If you do the first draft a lotof firms will act as we do and
just review those for no cost.
(11:11):
And then you move on to the next stage.
And the next stage isthe purchase agreement.
The purchase agreement isthe single most important and
complicated document in the process.
I'm gonna focus on sharepurchase agreements.
So there, there are two types agreement.
You will have either share,purchase, or asset purchase.
The documents themselves are very similarin feel, in length and in complexity.
(11:32):
But whichever route you're going down,let's just focus on share purchases today.
If you're gonna, if you're gonnado a share purchase that document
is the absolute key document.
It sets out all the terms.
Now, unlike the heads of termsare not binding generally.
Sometimes the parties would agreethat if one party pulls out at an
early stage, they will cover somecosts of the heads of terms, but
(11:54):
I generally don't agree to that.
So heads of terms are non-binding.
Non-binding, but your purchase agreementis the one that once you exchange
contracts and completes and nowadays,we generally do that on the same day.
That's the binding document.
And if things don't go right, andif there is an issue post-purchase,
that is a document that sets outall your rights and obligations.
(12:15):
So what the key parts of a sharepurchase agreement obviously price
and how that price is gonna be paid.
The second most important thingtiming of completion is there gonna
be a split exchange of completion.
And as I say, we try to avoidthat particular share purchase
straight trade clauses.
Really important.
So if you are gonna buy a business,what you wanna make sure is that you are
(12:36):
protecting the goodwill of the business.
That's really what you are buying.
So without restrain trade clauses aseller can sell his business and set up
the next day in competition doing exactlythe same thing and take all the clients.
So restrain trade clauses are key, andthey will, they typically will say for
a period of time, and sometimes withina particular area the seller can't keep
(12:58):
up a set up a competing business orbe employed in a competing business.
It would also protect all the clients.
So it would say that they can'tdeal with particular clients, and it
would also typically protect staff.
So it would say for a period oftime they can't poach staff that
are employed in the business.
So those are really key provisions, andif they're not in your share purchase
(13:19):
agreement, the seller's free to do whathe wants after you've given him the money.
The other thing from a purchase pointof view, which is really important,
is the share purchase agreementcontains what we call what I know
as warranties and indemnities.
Now these are promises.
So warranties are promises that thesellers give you about the business.
(13:39):
So take a really simple example.
You want to know that there are noclaims by the employees that are
being made against the company.
If it transpires after you've purchasedthe business, that there, there is
a claim by an employee against thebusiness that entit you to go back to
the seller and make a claim againstthe seller for for breach of warranty.
Now these claims, I'll say at thisstage are very rarely worth pursuing
(14:03):
through litigation 'cause they'rereally expensive to, to litigate.
But what they are, there are amechanism or a method to draw any
issues about the business out theout of the seller at an early stage.
Because if they think they're gonnabe sued then they will disclose
during the purchase during the sellerbusiness, any particular issues in it.
So warranties are key and most of thedocumentation in the share purchase
(14:26):
agreement centers around those warranties.
Indemnities are slightly different.
Inn indemnities are provisions,which say as a buyer, we've
identified a particular problem.
So it might be for example, thatthere's a particular issue with
or potential issue with tax.
And quite often you have a whole documentwithin the share purchase agreement
that just relates to tax indemnities.
(14:48):
So in relation to tax you will sayif this particular event occurs you
would indemnify us on a pound for poundbasis for the losses that we incur.
That needs to be contrasted withthe remedy for breach of warranties.
So if a warranty is breached,what you have to do is first of
all, show there's been a breach.
(15:08):
Secondly, you have to showthat you've suffered a loss as
a consequence of that breach.
And thirdly, and this is the mostdifficult part of these claims, this is
why they're rarely bought in small deals.
You have to show that breach ofwarranty is actually devalued
the overall value of the shares.
So it's not as simple as saying,we've lost 200,000 pounds,
(15:28):
you've gotta pass us it back.
However with a, with an indemnityclaim is a pound for pound indemnity.
So you don't have to showa damage and show loss.
All you need to show is if that eventhas occurred and has resulted in a
particular financial quantifiableloss, you can just claim that back.
And the easiest way to, to claimthat back, rather than litigating
is to have a, either a retentionunder the share purchase agreement.
(15:52):
So in the agreement you say.
We will set up an escrow account.
And so cash will be left in thatfor a period of time, might be
three months, six months, a year.
And after, after that period of time,if there's been no claims under the
warranties or indemnities that getsreleased that's one way of doing it.
The other way to do it which ispreferable from your point of view,
is for there to be a deferred payment.
(16:13):
So if you're gonna do a paymentupfront and then there's a deferred
payment, you are cash in hand.
So if there are post-completion claimsthat you want to pursue, it's gonna
be the seller that's gonna come afteryou to get that deferred payment.
And you can, on the initially atleast set off your potential claim
against that deferred payment.
(16:34):
And that's by far the best way to ensurethat if there is something wrong with the
business post completion, that you arenot having to solicitate as a purchaser.
When we're looking at the warrantiesand indemnities process that leads
us onto the due diligence process.
So as I said, share purchaseagreement, the most complex and most
important document in the transactionin terms of cost, that, that's
(16:57):
the most difficult part to cost.
Depends how big the dealis, how complex it is.
But even a simple share purchaseagreement in terms of, charging
hours, it's gonna cost six to 7,000pounds in the overall cost of things.
(17:46):
So it's a it's a big chunk ofyour legal costs at the outset.
The second biggest cost, in fact,probably the biggest cost is
the, is a due diligence process.
Due diligence is the process wherebywhen the deal starts out, I, as a lawyer
active for the purchaser will send out along questionnaire asking for a list of
documents for employment contracts withsuppliers contracts with with clients and
(18:11):
asking questions about the tax history,the employee's history, anything that
will draw out any potential issues.
What happens is the set as will,will respond to that questionnaire.
They will provide the documents that, thatwe want, and then we will do a report.
We'll go through those documents.
We'll identify any potential issueswe think there are with the business.
(18:34):
And that's the form within which we just,we say to you look, we think you need,
we need, we think you need indemnities,for example, or you need warranty
cover to cover this particular issue.
So due diligence process from a biasperspective is really important.
'cause it lets us identifyany potential issues.
From a seller's point of view, it'scrucial as well because, if they want
(18:55):
to ensure they're not gonna be liableunder some of the warranties and
indemnities that we asked for in thecontract, they have to disclose against
those warranties and indemnities.
So they have to write to the buyerand say, in relation to particular
warranties, you put in the agreement, weare making these specific disclosures.
And if they disclose against thosewarranties or against the indemnities,
(19:18):
then they're not on the hook forany claims provided they disclosed.
So that's the due diligence process.
Again, it's really hard to estimatehow much of the, how much that will be.
'cause it depends onhow big the business is.
And quite often you can have a smallbusiness with a huge amount of disclosure.
'cause there's lots of clients,for example, lots of suppliers.
(19:38):
And you can have a reallyvaluable business with only
one or two contracts in it.
So the process to cost isreally difficult, but it is the
biggest part of this process.
Now, on small deals if you want, anddepending upon your appetite for risk
and how experienced you are in thesector, you may decide that you wanna do
all or some of your own due diligence.
We can draft the questionnaire for you.
(20:00):
We'll send it to the seller.
They will provide the documentsand they will provide a list
of answers to our questions.
We then send it to you.
And we carve out within ourengagement letter that we are
not gonna do any due diligence.
So the due diligence is down to you.
But you can come to us if you've got anyparticular queries, or you can say to
us, will you only look at certain areas?
(20:22):
So you might want us to look just atthe employment contracts, for example.
So where I'm getting to is duediligence really expensive or the most
expensive part of your purchase process?
But there are ways ofcontrolling those costs.
So either do all the due diligence,but recognizing that if you
go down that route, you don'thave recalls to your lawyer.
(20:43):
If something comes outta the woodworkthat you haven't spotted in the
documents disclosed or do partialdue diligence, you do some of it.
We do some of it.
How much to give you a rough idea ona small deal, again, a DD process and
cost anything between four to 6,000.
Where you are coming to, you'regonna be, you're gonna ask me about
the overall cost of a transaction.
I would imagine.
(21:04):
I think that's gonna be on a small deal.
We try to keep our cost proportionateand ideally we try to agree a fixed
fee with you guys and we don't, and wedon't vary from that fee unless there's
something unforeseen that happens.
So on a smallish deal, you're probablylooking at anywhere between 15 to
25,000 pounds that's your, the kindof cost you need to be budgeting for.
(21:26):
And as I say, there areways to control those costs.
Particularly from the duediligence perspective.
Okay.
So we go we've done the SBA sharepurchase agreement, we've done the
due diligence and we then proceedonto the completion process.
So in the old days, weused to have a big meeting.
We we'd get the whiskey and champagneout when the deal went through,
(21:48):
and it was a great afternoon thattends not to happen now was the pc.
So what we do now is wegenerally complete remotely.
It'd be like you do with conveyance simand we have this system called DocuSign.
So the documents will all go out.
They will be signed bythe parties remotely.
They'll be witnessedremotely by witnesses.
All the documents come back in.
You transfer the purchase money to us.
(22:10):
If any money is passing on completion wecomplete the deal and then we send the
money to the to the seller's lawyers.
As I say, you can have asplit exchange in completion.
The reason we try to avoid thatis with a share purchase, if
you exchange, you are buying thelimited companies a going concern.
(22:30):
So in the period between thetime that you've exchanged and
the time that you've completed.
The seller is still running the business.
And that's not ideal.
So for that reason we tend to completeon the same day we've exchanged.
So it all happens in one big transaction.
You want it all done on the same day.
Yep.
(22:51):
That is the quickest whistle stoptour that I've done 'cause I'm
keeping an eye on the times today.
Generally speaking, the only reason, any quote or any fixed fee that you
get given by a lawyer changes iseither because something comes out
in due diligence that is significant,that's gonna involve further
negotiation with the with the sellers.
Or if you've got a terrible lawyeron the other side who drags out
(23:14):
the negotiations, un unnecessarily.
And this is why I'm saying having two Mand a lawyers involved in the transaction
will save so much time and paying for you.
So it's a deal falls through you talkingabout from the perspective of costs.
Yeah.
Okay.
So every lawyer have got their own way ofdealing with the issue of abortive costs.
So some lawyers will operate ona complete no win, no fee basis.
(23:36):
We don't do that, but as I say, somefirms will do that, but what you
will find is if they operate on a nowin, no, no fee, generally speaking,
they want a fairly significantmarkup if the deal does complete.
Typically how we operate is that we giveher the option we can say she right?
It's just a straightforwardretainer with you.
We've agreed a fee.
And if the deal falls through, that'sthe fee that you pay or a. You can
(24:01):
agree in a bulk arrangement with us.
And the one, the typical one that wedo is that if the deal falls through,
we will charge you the lesser ofthe time you've actually got on the
clock for that deal, or 50% of thefixed fee that we agreed with you.
But if you want that arrangementon the outside, we will charge
an uplift of 20% for completion.
So it depends, again, on your appetitefor risk and how much you want to limit
(24:25):
the risk should the deal fall through.
What I'd say to you is this, when you'redoing your due diligence and you've
identified a business getting youraccountant involved before you get your
lawyers involved is always a really goodidea because if the business doesn't
stack up from a financial point of view,the law, the lawyers can't put that
right in, in any document or agreement.
(24:45):
So if you're happy that the businessfinancially is doing well, the tax
has been paid that's a great start.
And you wanna know that beforeyou start incurring legal costs.
And if it doesn't stack up financiallyand you've not structured your lawyer
to do anything significant on thedeal, then you're gonna limit your
risk on those costs once you've gonepast the financial due diligence stage.
(25:06):
The only real reason that a deal will fallthrough at that stage, it's either because
the seller withdraws because they don'twanna sell what they get a better offer.
But again, it's possible to include aclause in your agreement if that happens.
So if the seller withdraws for fora reason, isn't a good reason they
will pay some all of your costs tothat part or something significant
comes out in the due diligence processthat you say to your client, look,
(25:27):
this is an absolute deal breaker.
You can't go ahead with this deal.
But other than that, I would say whatproportion of deals fall through?
I'm gonna say of the deals thatwe've done, the 200 deals that
we've done, certainly less than10%, possibly less than 5%.
So generally speaking, once we'vegot the deal going and provided the
financial due diligence has been done,those deals tend not to fall through.
(25:49):
But it is a risk.
You're right.
So when we sign a retainer letter with youguys, our retainer letter is . Either with
your SPV or with your holding company.
So that is the entity that has to pay us.
Now, that doesn't mean to say that youcan't pay us from the target company
funds, but what has to happen is there hasto essentially be an accounting exercise.
(26:10):
Now, I know that some lawyers don'tgo through this process, but we do.
So you've got your SPV you acquire yourtarget business has got cash in the bank.
What you can then do is divvy themoney up from your target business to
your SPV and then the SPV can pay us.
So the short answer is yes, but it,but legally or from the law, society,
regulatory point of view, that's theprocess that it has to go through.
(26:33):
And we are quite happy for that paymentto come through post completion.
So when you do a share purchase,you are requiring a limited
company as a going concern.
And what that means is if there areany historical issues with tax, for
example, then you as the shareholderand owner of that business, have to
deal with that issue, then you mighthave recourse against the seller under
(26:56):
the indemnities or the warranties,but the actual claim by the revenue
will be made against the company thatyou've bought with an asset purchase.
It's very different.
And an asset purchase, you're notbuying a business as a going concern.
All you are doing is buyingthe business and assets.
So you have a limited company and you haveyour own SPV here, and your SPV just buys
(27:17):
the assets out of that limited company.
So if the revenue right to thatlimited company and say there's
a, there's an issue historicallywith tax, not your problem.
'cause all you've done istransferred assets from that
business to that business.
So it's the risk element of doingasset purchases is far lower.
But the cost of doing it, cost of doingasset purchase, conversely can be higher.
(27:40):
'Cause the due diligence in, interms of or the legal process of
getting assets across from onebusiness to the other can be complex
if there are properties involved.
Because if you have a limited companythat owns a property, when you buy the
shares of that limited company, thatproperty comes across automatically.
Whereas if you're doing an assetpurchase, you have to do a conveyance
(28:02):
in process from the selling company.
To your SPV.
So that adds another layer ofcost onto the deal for you.
And the other thing you'll findis this, is that sellers are more
reluctant to do asset sales becausethey're, from a tax point of view,
they're far less tax efficient.
. Okay.
Listen, I'm sorry.
(28:23):
That was so quick.
It's a really big area, really complexarea, but I'm hanging around for a while.
So if you've got any, individualquestions that you wanna chat with
me or something you don't wannatalk about in forum, just grab me.
I'm really happy to have a chat.
John Andrews, thank you very much, John.
Thank you.
Hi, this is Jonathan Jay, and welcometo Business Buying Strategies,
the number one podcast for peopleinterested in buying a business
without risking any of their own cash.
On this week's episode, you're goingto hear from my long-term lawyer,
John Andrews, who recently spoke to mymastermind audience about the legal issues
and the pitfalls of buying a business.
Yeah.
(00:49):
Yeah, just a brief background.
So I've worked with Jonathan Jay forprobably the last six, seven years.
I've been at two, three firms inthat time, and we've completed
200, 250 deals for people thathave been on the Dealmakers course.
So we're pretty well experiencedin Jonathan's methods
how these deals are done.
(01:10):
And it's been a real learningexperience over that period of time.
To share a little bit about myfirm we are a top 50 law firm.
We have offices in Manchester,Liverpool and London.
I head up the London office andall of the deal maker work is done
under my supervision in my office.
My job today is to give you a whistle stoptour on doing m and a deals the structure
(01:31):
of them, the process and really tell abit about how to engage with your lawyer.
And I know you're probably alreadykeen to have an understanding of what
these things cost most importantly.
So I'll I'll do my best to giveyou some parameters on that.
What I say is this is when you're startingout on this journey, and Jonathan will
tell you you're invariably gonna dothese acquisitions via a limited company.
So you will set up your holding company,and if it's just you being the only
(01:56):
shareholder and the only person doingthe deals, then all well and good.
You can buy an off-the-shelfcompany and leave it as it is.
What I would say to you is that at thevery outset, if there's gonna be more than
one shareholder or if you anticipate inthe future there's gonna be more than one
shareholder, then the very first documentyour lawyer should be telling you to do is
to put together a shareholder's agreement.
(02:16):
And it's a document most peopleeither don't know about, think
they'll put it off to a later stagebecause they're expensive to draft.
And I think it's not necessary.
One thing I would say to you is this,of all the documents that you'll
put together when you're doing thesedeals, if you're going into partnership
with somebody and you're gonna havemore than one shareholder, more than
one director, that the shareholdersagreement is absolutely essential.
(02:38):
And my advice is get that doneat the earliest stage possible.
Now, what does ashareholders' agreement do?
It's a private contract betweenthe shareholders and the business.
And the reason you need it is thatif you set up a limited company
and you just unlock shares to 1,2, 3 people, including yourself,
there's two consequences of that.
(02:59):
First of all, once those shares have beenallotted, you can't get those shares back.
So if those shareholders decidethat they're not gonna take
any part in their business.
If they wanna retire from the business,want no involvement in it unless
that's something you intended, theyare entitled to retain their shares.
Once they've left, they're entitledto a proportionate dividends.
(03:19):
If they've got 50% of the shares,they get 50% of the dividend.
And when you eventually exit the business,they're entitled to 50% of the exit price.
So you'll see that there are anumber of scenarios where you
would not want that to happen.
So a shareholders agreement, the firstthing it does, it says in certain
circumstances remaining shareholders havethe right to acquire those shares back.
(03:41):
And you can fix the price forthose shares a number of ways.
It could be market value, it couldbe a prefixed price or it could
even be a nominal price if thedepart shareholder is a bad lever.
So even bad circumstances that's thefirst thing a shareholders agreement does.
The second thing is a shareholdersagreement can do, is it can create
(04:01):
obligations between the partiesto it so you can set out what the
obligations of each shareholder arein participating in the business.
And this goes beyond any employmentagreement or service contract
that you might have with them.
The third thing that the shareholdersagreement can do is address the the
issue of different share classes.
Now, when you set acompany up off the shelf.
(04:22):
All shares rank equally.
So you just have one class of share.
They have equal voting rights equalproportionate entitlement to dividends.
So again, if you're gonna be quitesophisticated on the, at the beginning
of your journey, and this will be morethan one shareholder, you might want
to create different classes of share.
They're called alphabet shares.
Commonly you have class A, B, CD.
(04:43):
Creating these shares involvesamending the articles of association
or having bespoke articlesdrafted at the very beginning.
Articles of association arethe rules of the company.
All limited companies have them.
If you just buy a company off the shelf,there will be standard articles with
one class of share., If you're gonnabe sophisticated, you will acquire that
(05:03):
company and you either adopt brand newarticles on the day that you buy that off
the shelf company, or you will amend thosearticles to create the classes of share.
The reason you create classes of shareis you can then have different rights
in terms of voting and differentrights in relation to, to dividend
different rights to buy shares back.
(05:24):
Again, quite complicated at the outset,but if you are gonna go into business
and acquire businesses with a numberof colleagues, partners, whatever
you wanna call them, then creatingthese separate classes of shares,
something you wanna consider, and thenwithin the shareholders' agreement,
you can set out additional rightsas to how those shares are gonna be
dealt with in the event of disposal.
In the event of a a disputebetween the parties.
(05:46):
So shareholders agreement at the veryoutset should at least be raised with you
by any lawyer that you're gonna speak to.
And that probably brings me on tothe most important point of today.
M and a work is really specialized.
I've been doing it for 30 years.
And I can always tell when a lawyeron the other side is dabbling.
Now doing MA work is a mixtureof knowing the law, but it's also
(06:07):
really a question of experience.
I've made lots of mistakes inthe past, all lawyers have.
But you learn from those mistakes,and you also build up a commercial
awareness on these deals.
What, what feels right?
And if you don't do these dealsday in, day out, then you're not
doing the best for your clients.
So I would say this don'talways be driven by price.
Be driven by experience.
(06:28):
Price is important.
I get that.
But ultimately, a bit like buying a house.
This is a major acquisitionyou're gonna do.
You wanna get it right.
And you want a lawyer that knowshis way around the documentation
importantly from a legal perspective,but also from the point of view of
negotiation and doing the deal for you.
And I say that because there, there area number of times that we're doing deals.
(06:48):
And at the beginning of your journeyyou probably are gonna be motivated by
how much these deals are gonna cost you.
And some lawyers will spend hoursarguing one word in a contract.
And the.
What you need is a lawyer to say toyou that's, that is really important,
that, that's a deal breaker.
Or you need, or by the same token youneed a lawyer says, you know what?
(07:10):
We can let that go.
We can part that.
The chances of that actually goingpear shaped for you are fairly minimal.
So the commercial side of the negotiationfrom your lawyer's perspective is just
as important as the legal side of it.
So get a lawyer that, thatis an m and a specialist.
The other thing I'd say to you is this.
If you acquire the business and theseller hasn't got a lawyer, then make
(07:34):
sure he's getting an m and a specialist.
'cause otherwise we've got no control whothe other side is or how sensible they
will be over their their negotiations.
What I often do if I'm acting for abuyout, even for a seller, I've got
three or four lawyers that I've workedwith on a number of occasional deals.
We like working with them.
They know how we draft our documents.
They know what we will accept, whatwe won't accept, and vice versa.
(07:57):
What that does is it speeds the deal up.
It makes it cheaper because we'renot arguing over city points.
'cause more or less we knowwhat the documents are gonna
look like at the outset.
And it means ultimately thewhole transaction is less
stressful for you guys.
So having two good m and alawyers on each side is important.
And as I say, if the seller hasn'tgot a lawyer, then pushing towards a
(08:19):
lawyer that's got MA experience or.
Your own lawyer may be able to makea recommendation to who they've
worked with on the other side before.
I've gotta keep an eye time.
Moving on to the variousaspects of the transaction.
What I should come back toactually I didn't do, I didn't
see how much shareholders'agreement was gonna cost today.
Lawyers never liked sticking their neckout and say what it's gonna be for a
straightforward shareholders agreement.
(08:41):
You are probably looking at somewherebetween three to 5,000 pounds now.
Quite a big investment at the veryoutset of your buying journey.
But the cost it can save you inthe long run are significant.
I won't give you some of the examplesI've come across where shareholders
agreements haven't been put in place.
But I can tell you that I'vedone some litigation where the
(09:02):
costs were 200,000 each side.
We won the case in the end, but200,000 pounds of probably 18
months of this person's life.
So really for the sake of threeto 5,000 pounds of investment
worth making, more sophisticatedagreements, which you probably
won't want at the outset, probablyanywhere between 10 and 15,000 pounds.
But that's when you'refurther down the journey.
(09:24):
Perhaps when you're bringing in privateequity investors into the business.
You can revisit your shareholdersagreement and make it a
little bit more sophisticated.
So if we move on to the stagesof doing an m and a deal first
document is head of terms.
Generally speaking with the dealmaker deals how we deal with 'em in
my firm is we say to the client lookyou come to us with a draft head.
(09:47):
So you've had your discussions withthe with the buyer, with the seller.
Jonathan's got a template he's used,which is perfectly adequate, and
I've seen that a number of times.
You agree the price, you agreewhen the deal is gonna take
place, any special provisions, andthen you, that gets sent to us.
And we don't charge for reviewing that.
We look through it.
We often tweak the document at thatstage just to cover some points
(10:08):
that you may not have thought.
And it's really careful.
It is kept quite quite importantthat in relation to that document.
Any material terms, particularlyin relation to personal
guarantees are covered.
So what you don't wannado is start a deal.
The seller's lawyer gets instructed,and the first thing you're asked
for is a personal guarantee.
Now, Jonathan has a mantra, don't givethem, he's absolutely right about that.
(10:29):
But what you don't wanna do is spendtwo or 3000 pounds going a little bit
of the way down the line and suddenlyfind that's gonna be a deal breaker.
So all those key termsneed to go into the heads.
As I say we don't chargefor reviewing those.
And the reason we don't charge is itenables us at an early stage to make
sure the structure of the deal stands up.
It lets us price the deal at that stage.
(10:50):
At a very early stage, more or less,what that transaction's gonna cost you.
If you do want a lawyer to draft theirheads of terms generally speaking,
somewhere between two and 3000 pounds,depending upon how complicated they are.
So you can save yourself alot of time, a lot of cost.
If you do the first draft a lotof firms will act as we do and
just review those for no cost.
(11:11):
And then you move on to the next stage.
And the next stage isthe purchase agreement.
The purchase agreement isthe single most important and
complicated document in the process.
I'm gonna focus on sharepurchase agreements.
So there, there are two types agreement.
You will have either share,purchase, or asset purchase.
The documents themselves are very similarin feel, in length and in complexity.
(11:32):
But whichever route you're going down,let's just focus on share purchases today.
If you're gonna, if you're gonnado a share purchase that document
is the absolute key document.
It sets out all the terms.
Now, unlike the heads of termsare not binding generally.
Sometimes the parties would agreethat if one party pulls out at an
early stage, they will cover somecosts of the heads of terms, but
(11:54):
I generally don't agree to that.
So heads of terms are non-binding.
Non-binding, but your purchase agreementis the one that once you exchange
contracts and completes and nowadays,we generally do that on the same day.
That's the binding document.
And if things don't go right, andif there is an issue post-purchase,
that is a document that sets outall your rights and obligations.
(12:15):
So what the key parts of a sharepurchase agreement obviously price
and how that price is gonna be paid.
The second most important thingtiming of completion is there gonna
be a split exchange of completion.
And as I say, we try to avoidthat particular share purchase
straight trade clauses.
Really important.
So if you are gonna buy a business,what you wanna make sure is that you are
(12:36):
protecting the goodwill of the business.
That's really what you are buying.
So without restrain trade clauses aseller can sell his business and set up
the next day in competition doing exactlythe same thing and take all the clients.
So restrain trade clauses are key, andthey will, they typically will say for
a period of time, and sometimes withina particular area the seller can't keep
(12:58):
up a set up a competing business orbe employed in a competing business.
It would also protect all the clients.
So it would say that they can'tdeal with particular clients, and it
would also typically protect staff.
So it would say for a period oftime they can't poach staff that
are employed in the business.
So those are really key provisions, andif they're not in your share purchase
(13:19):
agreement, the seller's free to do whathe wants after you've given him the money.
The other thing from a purchase pointof view, which is really important,
is the share purchase agreementcontains what we call what I know
as warranties and indemnities.
Now these are promises.
So warranties are promises that thesellers give you about the business.
(13:39):
So take a really simple example.
You want to know that there are noclaims by the employees that are
being made against the company.
If it transpires after you've purchasedthe business, that there, there is
a claim by an employee against thebusiness that entit you to go back to
the seller and make a claim againstthe seller for for breach of warranty.
Now these claims, I'll say at thisstage are very rarely worth pursuing
(14:03):
through litigation 'cause they'rereally expensive to, to litigate.
But what they are, there are amechanism or a method to draw any
issues about the business out theout of the seller at an early stage.
Because if they think they're gonnabe sued then they will disclose
during the purchase during the sellerbusiness, any particular issues in it.
So warranties are key and most of thedocumentation in the share purchase
(14:26):
agreement centers around those warranties.
Indemnities are slightly different.
Inn indemnities are provisions,which say as a buyer, we've
identified a particular problem.
So it might be for example, thatthere's a particular issue with
or potential issue with tax.
And quite often you have a whole documentwithin the share purchase agreement
that just relates to tax indemnities.
(14:48):
So in relation to tax you will sayif this particular event occurs you
would indemnify us on a pound for poundbasis for the losses that we incur.
That needs to be contrasted withthe remedy for breach of warranties.
So if a warranty is breached,what you have to do is first of
all, show there's been a breach.
(15:08):
Secondly, you have to showthat you've suffered a loss as
a consequence of that breach.
And thirdly, and this is the mostdifficult part of these claims, this is
why they're rarely bought in small deals.
You have to show that breach ofwarranty is actually devalued
the overall value of the shares.
So it's not as simple as saying,we've lost 200,000 pounds,
(15:28):
you've gotta pass us it back.
However with a, with an indemnityclaim is a pound for pound indemnity.
So you don't have to showa damage and show loss.
All you need to show is if that eventhas occurred and has resulted in a
particular financial quantifiableloss, you can just claim that back.
And the easiest way to, to claimthat back, rather than litigating
is to have a, either a retentionunder the share purchase agreement.
(15:52):
So in the agreement you say.
We will set up an escrow account.
And so cash will be left in thatfor a period of time, might be
three months, six months, a year.
And after, after that period of time,if there's been no claims under the
warranties or indemnities that getsreleased that's one way of doing it.
The other way to do it which ispreferable from your point of view,
is for there to be a deferred payment.
(16:13):
So if you're gonna do a paymentupfront and then there's a deferred
payment, you are cash in hand.
So if there are post-completion claimsthat you want to pursue, it's gonna
be the seller that's gonna come afteryou to get that deferred payment.
And you can, on the initially atleast set off your potential claim
against that deferred payment.
(16:34):
And that's by far the best way to ensurethat if there is something wrong with the
business post completion, that you arenot having to solicitate as a purchaser.
When we're looking at the warrantiesand indemnities process that leads
us onto the due diligence process.
So as I said, share purchaseagreement, the most complex and most
important document in the transactionin terms of cost, that, that's
(16:57):
the most difficult part to cost.
Depends how big the dealis, how complex it is.
But even a simple share purchaseagreement in terms of, charging
hours, it's gonna cost six to 7,000pounds in the overall cost of things.
(17:46):
So it's a it's a big chunk ofyour legal costs at the outset.
The second biggest cost, in fact,probably the biggest cost is
the, is a due diligence process.
Due diligence is the process wherebywhen the deal starts out, I, as a lawyer
active for the purchaser will send out along questionnaire asking for a list of
documents for employment contracts withsuppliers contracts with with clients and
(18:11):
asking questions about the tax history,the employee's history, anything that
will draw out any potential issues.
What happens is the set as will,will respond to that questionnaire.
They will provide the documents that, thatwe want, and then we will do a report.
We'll go through those documents.
We'll identify any potential issueswe think there are with the business.
(18:34):
And that's the form within which we just,we say to you look, we think you need,
we need, we think you need indemnities,for example, or you need warranty
cover to cover this particular issue.
So due diligence process from a biasperspective is really important.
'cause it lets us identifyany potential issues.
From a seller's point of view, it'scrucial as well because, if they want
(18:55):
to ensure they're not gonna be liableunder some of the warranties and
indemnities that we asked for in thecontract, they have to disclose against
those warranties and indemnities.
So they have to write to the buyerand say, in relation to particular
warranties, you put in the agreement, weare making these specific disclosures.
And if they disclose against thosewarranties or against the indemnities,
(19:18):
then they're not on the hook forany claims provided they disclosed.
So that's the due diligence process.
Again, it's really hard to estimatehow much of the, how much that will be.
'cause it depends onhow big the business is.
And quite often you can have a smallbusiness with a huge amount of disclosure.
'cause there's lots of clients,for example, lots of suppliers.
(19:38):
And you can have a reallyvaluable business with only
one or two contracts in it.
So the process to cost isreally difficult, but it is the
biggest part of this process.
Now, on small deals if you want, anddepending upon your appetite for risk
and how experienced you are in thesector, you may decide that you wanna do
all or some of your own due diligence.
We can draft the questionnaire for you.
(20:00):
We'll send it to the seller.
They will provide the documentsand they will provide a list
of answers to our questions.
We then send it to you.
And we carve out within ourengagement letter that we are
not gonna do any due diligence.
So the due diligence is down to you.
But you can come to us if you've got anyparticular queries, or you can say to
us, will you only look at certain areas?
(20:22):
So you might want us to look just atthe employment contracts, for example.
So where I'm getting to is duediligence really expensive or the most
expensive part of your purchase process?
But there are ways ofcontrolling those costs.
So either do all the due diligence,but recognizing that if you
go down that route, you don'thave recalls to your lawyer.
(20:43):
If something comes outta the woodworkthat you haven't spotted in the
documents disclosed or do partialdue diligence, you do some of it.
We do some of it.
How much to give you a rough idea ona small deal, again, a DD process and
cost anything between four to 6,000.
Where you are coming to, you'regonna be, you're gonna ask me about
the overall cost of a transaction.
I would imagine.
(21:04):
I think that's gonna be on a small deal.
We try to keep our cost proportionateand ideally we try to agree a fixed
fee with you guys and we don't, and wedon't vary from that fee unless there's
something unforeseen that happens.
So on a smallish deal, you're probablylooking at anywhere between 15 to
25,000 pounds that's your, the kindof cost you need to be budgeting for.
(21:26):
And as I say, there areways to control those costs.
Particularly from the duediligence perspective.
Okay.
So we go we've done the SBA sharepurchase agreement, we've done the
due diligence and we then proceedonto the completion process.
So in the old days, weused to have a big meeting.
We we'd get the whiskey and champagneout when the deal went through,
(21:48):
and it was a great afternoon thattends not to happen now was the pc.
So what we do now is wegenerally complete remotely.
It'd be like you do with conveyance simand we have this system called DocuSign.
So the documents will all go out.
They will be signed bythe parties remotely.
They'll be witnessedremotely by witnesses.
All the documents come back in.
You transfer the purchase money to us.
(22:10):
If any money is passing on completion wecomplete the deal and then we send the
money to the to the seller's lawyers.
As I say, you can have asplit exchange in completion.
The reason we try to avoid thatis with a share purchase, if
you exchange, you are buying thelimited companies a going concern.
(22:30):
So in the period between thetime that you've exchanged and
the time that you've completed.
The seller is still running the business.
And that's not ideal.
So for that reason we tend to completeon the same day we've exchanged.
So it all happens in one big transaction.
You want it all done on the same day.
Yep.
(22:51):
That is the quickest whistle stoptour that I've done 'cause I'm
keeping an eye on the times today.
Generally speaking, the only reason, any quote or any fixed fee that you
get given by a lawyer changes iseither because something comes out
in due diligence that is significant,that's gonna involve further
negotiation with the with the sellers.
Or if you've got a terrible lawyeron the other side who drags out
(23:14):
the negotiations, un unnecessarily.
And this is why I'm saying having two Mand a lawyers involved in the transaction
will save so much time and paying for you.
So it's a deal falls through you talkingabout from the perspective of costs.
Yeah.
Okay.
So every lawyer have got their own way ofdealing with the issue of abortive costs.
So some lawyers will operate ona complete no win, no fee basis.
(23:36):
We don't do that, but as I say, somefirms will do that, but what you
will find is if they operate on a nowin, no, no fee, generally speaking,
they want a fairly significantmarkup if the deal does complete.
Typically how we operate is that we giveher the option we can say she right?
It's just a straightforwardretainer with you.
We've agreed a fee.
And if the deal falls through, that'sthe fee that you pay or a. You can
(24:01):
agree in a bulk arrangement with us.
And the one, the typical one that wedo is that if the deal falls through,
we will charge you the lesser ofthe time you've actually got on the
clock for that deal, or 50% of thefixed fee that we agreed with you.
But if you want that arrangementon the outside, we will charge
an uplift of 20% for completion.
So it depends, again, on your appetitefor risk and how much you want to limit
(24:25):
the risk should the deal fall through.
What I'd say to you is this, when you'redoing your due diligence and you've
identified a business getting youraccountant involved before you get your
lawyers involved is always a really goodidea because if the business doesn't
stack up from a financial point of view,the law, the lawyers can't put that
right in, in any document or agreement.
(24:45):
So if you're happy that the businessfinancially is doing well, the tax
has been paid that's a great start.
And you wanna know that beforeyou start incurring legal costs.
And if it doesn't stack up financiallyand you've not structured your lawyer
to do anything significant on thedeal, then you're gonna limit your
risk on those costs once you've gonepast the financial due diligence stage.
(25:06):
The only real reason that a deal will fallthrough at that stage, it's either because
the seller withdraws because they don'twanna sell what they get a better offer.
But again, it's possible to include aclause in your agreement if that happens.
So if the seller withdraws for fora reason, isn't a good reason they
will pay some all of your costs tothat part or something significant
comes out in the due diligence processthat you say to your client, look,
(25:27):
this is an absolute deal breaker.
You can't go ahead with this deal.
But other than that, I would say whatproportion of deals fall through?
I'm gonna say of the deals thatwe've done, the 200 deals that
we've done, certainly less than10%, possibly less than 5%.
So generally speaking, once we'vegot the deal going and provided the
financial due diligence has been done,those deals tend not to fall through.
(25:49):
But it is a risk.
You're right.
So when we sign a retainer letter with youguys, our retainer letter is . Either with
your SPV or with your holding company.
So that is the entity that has to pay us.
Now, that doesn't mean to say that youcan't pay us from the target company
funds, but what has to happen is there hasto essentially be an accounting exercise.
(26:10):
Now, I know that some lawyers don'tgo through this process, but we do.
So you've got your SPV you acquire yourtarget business has got cash in the bank.
What you can then do is divvy themoney up from your target business to
your SPV and then the SPV can pay us.
So the short answer is yes, but it,but legally or from the law, society,
regulatory point of view, that's theprocess that it has to go through.
(26:33):
And we are quite happy for that paymentto come through post completion.
So when you do a share purchase,you are requiring a limited
company as a going concern.
And what that means is if there areany historical issues with tax, for
example, then you as the shareholderand owner of that business, have to
deal with that issue, then you mighthave recourse against the seller under
(26:56):
the indemnities or the warranties,but the actual claim by the revenue
will be made against the company thatyou've bought with an asset purchase.
It's very different.
And an asset purchase, you're notbuying a business as a going concern.
All you are doing is buyingthe business and assets.
So you have a limited company and you haveyour own SPV here, and your SPV just buys
(27:17):
the assets out of that limited company.
So if the revenue right to thatlimited company and say there's
a, there's an issue historicallywith tax, not your problem.
'cause all you've done istransferred assets from that
business to that business.
So it's the risk element of doingasset purchases is far lower.
But the cost of doing it, cost of doingasset purchase, conversely can be higher.
(27:40):
'Cause the due diligence in, interms of or the legal process of
getting assets across from onebusiness to the other can be complex
if there are properties involved.
Because if you have a limited companythat owns a property, when you buy the
shares of that limited company, thatproperty comes across automatically.
Whereas if you're doing an assetpurchase, you have to do a conveyance
(28:02):
in process from the selling company.
To your SPV.
So that adds another layer ofcost onto the deal for you.
And the other thing you'll findis this, is that sellers are more
reluctant to do asset sales becausethey're, from a tax point of view,
they're far less tax efficient.
. Okay.
Listen, I'm sorry.
(28:23):
That was so quick.
It's a really big area, really complexarea, but I'm hanging around for a while.
So if you've got any, individualquestions that you wanna chat with
me or something you don't wannatalk about in forum, just grab me.
I'm really happy to have a chat.
John Andrews, thank you very much, John.
Thank you.
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