Pre-acquisition phase

You have decided to transfer a business or to buy one. Now you need a buyer and seller who will find each other. For most of the time it’s a coincidence. It may be that two companies that have been working together for a long time decide to merge. Or intermediaries who are constantly scouring the market for opportunities for a possible takeover. The takeover process always starts with a sort of ‘sniffing around’ phase, during which the parties get to know each other to see whether there is any interest at all. This phase is characterised by informal discussions. Both sides must have the will to start the transaction before documents are drawn up. Depending on the situation, this can take a relatively long time. Again, this varies from case to case.

How does one sell such a company? That depends very much on various factors such as the size of the company, the circumstances in which the sale must take place and whether there are any intermediaries involved in the deal. But a lot of acquisitions take place between buyer and seller who meet by chance. This is sometimes called “a sale one-on-one” in the jargon. This is not a legal expression but rather a collective term for the situation in which buyer and seller come into direct contact with each other in any way, without the presence of intermediaries.

In case of larger takeovers, when a lot of money is at stake and intermediaries are present, an attempt is often made to stimulate competition by organising an auction. In other words, a company that proactively puts itself on the market for sale in order to get potential buyers to bid against each other. In the case of an auction, it is the seller who keeps a very strong grip on the process. By means of a process letter, the seller will describe how he wants to organise the sales process and therefore reserves a great deal of contractual freedom. From a (long) list of potential buyers, the seller (or intermediary) will initially contact a number of companies to gauge their interest.

Next, the seller will prepare a teaser. This is a sales document in which the target is presented in the most attractive way. A teaser will usually be accompanied by a disclaimer in which the seller states that the information shown is only for the purpose of arousing the interest of potential buyers, and therefore without assuming any legal liability. Finally, the seller will send an information memorandum to the potential buyers who have aroused his interest. This is a document that describes the company and contains, in addition to a good summary, the following information: company history, description of products and services, market position, management, financial

information, etc. In other words, the seller describes the company and its activities. It’s the vendor who describes his vision of the company.