Navigating a corporate transaction involves a series of structured steps and can be complex in practice. To provide a clear overview, we have created a flowchart setting out the main stages of a typical share sale transaction. Please scroll down to the end of this article for a copy of the flowchart. This article focuses on stage 1 of the flowchart “Preparation” and is the first in our upcoming series that will examine each key stage of the process in more detail.
What is a Share Sale?
A share sale is a transaction where the shareholders of a company sell their shares to a buyer, transferring ownership of the entire company. This contrasts with a business (sometimes called an asset) sale which involves the company itself transferring all or some of its assets and liabilities to a buyer.
Stage 1 Preparation
The sellers will first market the target company. While they may do this themselves, brokers and/or corporate finance advisers are often engaged to assist, and we can introduce clients to suitable advisers through our professional network, if helpful.
Once the parties have been determined, the buyer will arrange funding either through available cash resources or external funding arrangements. If a buyer requires external funding, the funder is likely to impose a number of conditions, such as ensuring that thorough checks have been carried out on the company, agreeing the order in which debts will be repaid, or setting out how lenders cooperate if there are multiple funders involved. As the funding is crucial to the transaction, it is important all parties are on board with these conditions to prevent issues later down the line.
The deal structure will also be agreed between the buyer, sellers and their respective advisors at the preparation stage. The correct structure for a transaction is typically driven by tax and risk factors and it is critical that all parties take the appropriate professional advice.
What’s Next? A Closer Look at Stages 2 to 6
Each stage of the transaction involves detailed processes, negotiations, and legal documentation. To build on this, our mini series of articles will examine stages 2 to 7 in more detail. This series is intended to provide a clearer understanding of how corporate transactions unfold in practice and how we can assist clients at each stage of the process.
This article is for information only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0118 951 6200.
