When it comes to the purchase and acquisition of a business, there’s a lot to consider. It’s often a complex and dynamic process. Depending on the state of the target company (i.e. the company that is up for sale or purchase), the parties’ respective wishes, the target timelines, required internal/external approvals, and financing, the acquisition process can take months - or even years - to complete. It can unfold in various ways, but it typically follows the phases outlined below.

1. Preparation phase
It all begins in the preparation phase, where the seller meticulously prepares the target company for the sale and acquisition by updating the contractual framework and (financial) records, and resolving any outstanding legal disputes. A compelling teaser or informational memorandum is prepared to attract and spark the interest of potential buyers.

2. LOI phase
Once a potential buyer is found, we move on to the LOI phase. This is the phase where the buyer and seller sign the letter of intent, which outlines the terms of the proposed purchase and acquisition, such as the timelines, initial purchase price framework, and the conditions that must be met to finalize the acquisition. This might involve the approval from the supervisory board, confidentiality, exclusivity, and the due diligence (audit of the company’s records) to be conducted by the buyer.

3. Due diligence phase
The next phase is the due diligence phase. During this phase, the seller sets up a virtual data room where all critical information about the target company is stored. As a potential buyer, you are given the opportunity to conduct a thorough audit to gain the best possible understanding of what you might be purchasing or acquiring. You will have access to valuable documents, such as contracts, annual reports, permits, and information about the employees of the target company. 

During this phase, you also have the opportunity to ask the seller questions and visit the target company. If the due diligence report is satisfactory, the next step is to draft the legal documentation.

4. Documentation and negotiation phase
In this phase, the buyer prepares the first drafts of the legal documentation, with the sale and purchase agreement being the key document. In this agreement, the parties outline the terms of purchase of the target company, the purchase price, warranties, and the seller's non-compete clause. The seller then reviews these documents and enters into negotiations with the buyer to finalize the terms of the sale. During this phase, the parties' legal advisors are usually present as well to assist them as necessary.

5. Signing phase
Once the parties have negotiated the legal documentation, they can proceed to sign the documents. From this point on, the parties are legally bound by the acquisition agreement.

6. The phase between signing and closing
Sometimes, there are a number of conditions precedent that must be met before the transaction can proceed to the closing phase. This may include approval from relevant authorities, such as the Authority for Consumers and Markets (ACM). Companies cannot grow so large that they stifle competition, and the ACM oversees this. 

7. Closing phase: 
And then the moment arrives: the closing. At the notary’s office, the share transaction is officially finalized, and the shares are transferred to the buyer through a notarial deed of transfer.

Blog Series
Would you like to learn everything there is to know about the sale and purchase of a business?
This blog post is part of a series that covers the different phases and legal aspects involved in the sale and purchase of a business. The next blog post will focus on key considerations to keep in mind during the due diligence phase. Click this link to see the full list of topics.