Acquisitions or mergers of existing businesses should be preceded by thorough due diligence investigations to ensure that the risks involved are reflected in the applicable price, terms and conditions. The termination of contracts by customers, the departure of key personnel, eviction from premises or challenges associated with public permits, licenses or requirements may mean that what may initially appear to be an attractive transaction is in fact entirely without interest. If owners are to collaborate on further development, the way ahead must be agreed, as must the steps that need be taken should one or more of the owners fail to contribute. Perhaps the preferred course of action is for the vendor to take a profit, call it a day, and move on to other activities without having to handle claims and legal disputes that could continue for many years after the transaction.
Furthermore, in our view transactions can often be simplified. Lawyers’ work on transactions is increasingly inspired by large-scale foreign contracts and other documentation. This adds cost and is in many cases unnecessary, especially in the case of transactions involving small and medium-sized enterprises.