WE BOUGHT THE COMPANY - Signed. What next?

Posted by: 16. 8. 2024
Update: 17/5/2025

In the previous article, we dealt with the shareholders' agreement (that is, the SHA). Today we will build on it, cross the imaginary Rubicon and we reach a point of no return. Why? In today's article, we will look at the finalization of the acquisition process, i.e. at signing the contract itself for the purchase of a business share in the target company (English "sales and purchase agreement", SPA for short).

We will focus not only on the key steps that need to be taken immediately after signing the purchase contract (hereinafter referred to as "SPA"), but also on steps that are appropriate and possible to implement even before the signature itself. The moment of signature is the most important milestone in the acquisition process (if we do not count the earlier SHA signature) and it is really worth setting before it right timing, to perform consistent planning and in detail think through all eventualities. Since separate articles in the series We bought a company are devoted to individual topics, we will only present their overview in this article.

1. Before signing the contract: Final preparations

Before signing the contract itself, it is important to ensure that all necessary steps are completed beforehand. This may include in particular:

Completion of the background check: Ensure that all due diligence is complete and satisfactory. This includes legal, financial, real estate and possibly regulatory background checks. It is certainly without complete documents appropriate to consider postponing the signature date.
Confirmation of Secured Funding: Confirm that all your financial arrangements are in order and that the funds are there ready for transfer. It is also advisable to check that you comply with the terms of financing and that you will comply by signing within the given deadline.
Checking conditions: Check that all the conditions specified in the SHA, if you signed it as part of the transaction, or in any other previous agreements (e.g. termsheet etc.). These are actions or events that must occur before a transaction is complete.
Preparing space for post-signature steps: Think through the steps you will need to implement as soon as possible after signing and set aside a sufficient team and resources for them. There is nothing worse than signing a SPA and entering unmanaged chaos. By precisely treating the following essentials, you will save yourself a lot of trouble and you can prevent considerable damage. Definitely not a bad thing to have on hand time schedule of individual steps, but it is, after all, appropriate to process it for the entire transaction.

2. Immediately after signing: Immediate action

Once the SPA is signed, the following steps should be taken as soon as possible:

Informing interested parties: Inform employees, customers, suppliers and other interested parties about the acquisition. Transparency is key to maintaining trust and stability.
Informing public authorities: Make all necessary filings with relevant public authorities, authorities or other relevant authorities.
Transfer funds: Arrange for the transfer of funds as per the terms of the SPA. This often requires coordination with banks, financial institutions and investors
Establishment of escrow accounts: If relevant, set up a so-called escrow accounts (so use escrow) for any withholding or contingent payments.
Renewal and update of licenses/public authorizations: If the company has specific authorizations to conduct business, ensure that the company does not lose them as a result of the takeover, or select which authorizations the company will retain and which will terminate.

3. Integration of society

After the initial steps, focus on the following tasks, the fulfillment of which will ensure the proper and effective integration of the new company into your existing property structure:

Notice of change of control authority: Inform the relevant authorities about the change of bodies. This may include antitrust authorities, industry regulators and tax authorities.
Operational integration: Begin integrating the acquired company's operations with your existing business. This includes aligning systems, processes and organizational structures.
Cultural integration: Deal with cultural differences and work to create a cohesive team. This may include change management programs and team activities.
Communication with customers and suppliers: Reassure customers and suppliers of service continuity and proactively address any concerns they may have.

4. Change in the founding legal act of the company

The founding legal proceedings of the company regulate the rules for the management and structure of the company. As a result of the acquisition, it is most likely that some changes will have to be made. Whether with regard to subordinates accepted by SHA, or for another reason. As for his change, yes four questions need to be asked:

Do we need to change it? Change the articles of incorporation if there are changes in the company's management, share capital or other fundamental aspects of the company. This should be done immediately after the acquisition (sometimes in advance, see below).
When to change it? Think about whether the changes can be made in coordination with the seller even before signing the SPA - sometimes a preliminary change is necessary due to certain specifics of the given acquisition, other times it is least appropriate. If the business share can be transferred even without a previous amendment to the founding legal act and the functionality of the transaction will not be jeopardized, they will wait to determine.
How to change it? You will need notarization? Who will need to be present at the signing? A simple signature is enough, or you need it signature officially verified? There is nothing worse than when a transaction crashes (or at least moves) due to e.g. missing signature verification.
How to change it? It is directly related to the opening question. However, it is not necessary to accept the final wording of the founding legal act immediately after signing the SPA. In this first phase we really only deal with the most pressing areas (e.g. change of business company, changes in the number of members of elected bodies, etc.)

5. Changes of members of elected bodies

If the acquisition involves changes in the elected bodies of the company (executives, supervisory boards, etc.), take the following steps:

Approval by the general meeting: The appointment or removal of members of elected bodies usually requires the approval of the general meeting. A specific situation is if the target company is a joint-stock company with the so-called German management model. In such a case, the members of the board of directors are elected by the supervisory board. Even such situations need to be remembered in planning.
Notification to Regulatory Authorities: Inform the relevant authorities of the changes. This usually involves filing specific forms and updating the company's public records.
Internal communication: Communicate leadership changes to all employees and stakeholders to ensure transparency and trust in the company.

záver

The signature of the SPA, i.e. the contract for the purchase of a business share, is a significant milestone in the acquisition process. In a way, though, it just is just the beginning a series of important steps to ensure the successful takeover of the company, its integration and its subsequent development.

After signing the contract, there is no turning back (mostly). That's why for sure recommended for the entire acquisition process use the consulting services of specialized experts, so that you don't miss anything and you could conclude the transaction with peace of mind and without worrying about imaginary skeletons in the closet.

In our next articles, we will deal in more detail with specific processes, such as the change of the company's articles of association, the specifics of the change of statutory bodies and other key integration activities. Follow us for more information. Specifically, in the next part, we will look at the aforementioned changes to the articles of association, respectively the founding legal proceedings.

Do you need advice or representation at purchase of the company? Do you have any questions about our series or about signing a contract for the purchase of a business share? Contact us! We have many years of experience in buying companies!