Mergers & Acquisitions 


Mergers and acquisitions (M&A) refers to the consolidation of companies or assets. M&A can  include a number of different transactions, such as mergers, acquisitions, consolidations, purchase  of assets and management acquisitions. 

There are several reasons why companies merge with or acquire other companies, including but  not limited to the following reasons: 

  • Synergy 
  • Growth 
  • Diversification of Business and Industries 
  • Eliminate Competition 
  • Increase Supply-Chain Pricing Power 

Practical Guidance 

What is a Merger and Acquisition? 

Merger means that two or more merged companies shall cease to exist as a corporate legal entity  and shall result in a new company / legal entity which absorbs all the rights, liabilities and  obligations of the merged companies. The new resulting company out of such merger shall be the  legal successor of the merged companies.  

Acquisition means a company either purchases part of the shares or assets of another company or  the entire shares and assets of the other company (i.e. a take-over of the other company in this  case). 

The Advantages and Disadvantages Acquisitions 

Advantage of a Share Purchase 

The main advantage of a share purchase is that the target / acquired company remains as is, with  control simply transferring to the new owner / shareholder. There is no need to transfer the  underlying assets and liabilities of the company. Subject to any third party (that is, customer,  supplier, landlord or bank) or relevant authorities’ approvals required, the process of transferring  shares is generally a more straightforward process.

Advantage of an Asset Purchase 

The main advantage of an asset purchase is that a buyer can pick the assets and liabilities it wants.  This can help to avoid potential unknown liabilities. 

Disadvantage of Share Purchase 

The main disadvantage of a share purchase is that all assets and liabilities remain with the business  unless specifically carved out in the relevant sale and purchase documentation. Therefore, the  buyer must rely on contractual protections, typically in the form of warranties and indemnities. 

Disadvantage of Asset Purchase 

The main disadvantage of an asset purchase is that the assets must be transferred individually. For  example, this includes real estate, licences, commercial contracts, loans and employees. The  transfer of employees is a significant disadvantage to asset purchases. 

Assignment / transfer rights must be clearly mentioned in the contracts and government and  banks’ approvals must be obtained for transfer of real estates and loans. 


Preliminary Agreements  

Such agreements are usually made between the seller and the buyer before signing the asset /  share sale and purchase agreement (and the official asset / share sale agreement which need to be  registered with the government). 

  1. Non-Disclosure and Confidentiality Agreement 

In a asset / share sale and purchase, the seller discloses to the buyer sensitive information about  the target company and its business / assets, etc… to enable the buyer to conduct its legal and  financial due diligence. The seller will want to ensure the information is kept secret and is protected  from further disclosure and from misuse by the buyer (who may also be a competitor) or other  persons to whom such information is disclosed. 

The non-disclosure or confidentiality agreement is put in place to oblige the buyer and persons to  whom confidential information may be disclosed (such as employees of the target company, agents,  external auditors, lawyers, etc…) to keep the information safe, not to disclose it to third parties, and  not to forbid the buyer from using such information other than for its due diligence and evaluation  of the target company.

  1. Head of Terms, Letter of Intent or a Term Sheet

Head of Terms which are also called (letter of intent, memoranda of understanding or terms sheet)  usually set out the key commercial terms of a proposed sale and purchase (whether shares or  assets or both). These may include price, the shares or assets to be purchased, exclusivity of  negotiations during the due diligence process, conditions precedent or subsequent, proposed due  diligence process and timeframes.  

Major Agreements and Ancillary Documents 

  1. A sale and purchase agreement (for assets and/or shares) between the sellers and the buyers which must include condition precedents, representations, consideration, mechanism of completion and closing deliverable, closing dates, completion dates, etc… 
  2. A disclosure letter, the purpose of the disclosure letter is to disclose all matters affecting the target company which contradict or conflict with the warranties provided by the seller in the share / assets sale & purchase agreement. 

iii. A share transfer document and amendment to the company’s memorandum of  association and assets / business sale agreement signed in the presence of a notary  public.  

  1. Board or shareholders’ resolutions authorizing the sale and purchase of shares and/or assets.
  2. Powers of attorney signed in the presence of a notary public.
  3. A shareholders’ agreement in case of a share sale in the target company.

vii. An assets’ sale agreement in case of assets’ sale. 

viii. Assignment agreements for employees, suppliers, customers and real estate. ix. Management agreement for transitional period during which the sale formalities are taking place. 

For further information and assistance on advising on a merger and/or acquisition or sale of assets  and drafting the above agreements, please email us to

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