Company considerations: top 5 private company M&A tips from a corporate perspective
Insight
The disposal and acquisition of a company are pivotal milestones for any business or entrepreneur. For business owners, it is a chance to transition out of the business and reap the rewards of years of hard work and investment. For buyers, it can open doors to exciting opportunities for growth, diversification and increased market share. However, successfully navigating the complex process requires careful planning and strategic execution, often involving support from a cross-section of specialist advisers.
In this series of briefings, we will provide our top five tips in private M&A from various perspectives, including employment essentials, banking basics and property pointers. We start the series focusing on fundamental technical issues under English company law with our five key tips for ensuring a successful private M&A transaction. As we continue our series, we will also look at sale structures and the top five issues to consider in the negotiations.
Join our free webinar "International trends in private capital investment" which will cover what successful M&A and business exits look like in 2025, and how key UK and global trends are shaping dealmaking strategies in a rapidly evolving market.
1. Know your seller group
An aligned group of sellers makes for a seamless transaction, whereas misalignment and conflicting interests usually lead to disputes and delays.
Sellers should assess the cap table and establish who will form the seller group at the outset, so that potential issues or disputes can be identified, managed and, where possible, prevented.
Buyers should understand the seller group as soon as possible and assess the implications of any misalignment in the decision to sell.
2. Address historic shareholder issues
Historic issues around shareholders and company ownership often surface during the sale process and can have significant legal and financial consequences.
Sellers should ensure that any historic share buybacks or transfers were properly carried out.
Buyers should request and review documentation in respect of the same, to identify any unresolved issues that might affect the transaction.
3. Identify share transfer restrictions
A company’s articles of association govern how it operates, including the basic management and administration. Other contracts, such as investment agreements or shareholders’ agreements, may also dictate management and shareholder rights. These documents often contain provisions that restrict share transfers, such as rights of pre-emption or drag-along/ tag-along rights.
Sellers should identify any restrictions likely to impact or prohibit a sale and determine steps to disapply them or otherwise facilitate the transaction.
Buyers should also familiarise themselves with any such restrictions and should request necessary approvals before completing the transaction.
4. Maintain statutory registers
Maintaining accurate and up-to-date statutory registers is a legal requirement and promotes transparency and good governance by providing a record of ownership and management.
Sellers should ensure the statutory registers are up to date to minimise the risk of a buyer identifying anything that requires remedial action which may delay the transaction.
Buyers should conduct appropriate legal due diligence to verify the company’s compliance with its obligations.
5. Verify Companies House filings
Private companies must make notifications of certain changes, file returns and maintain records with Companies House.
Sellers should review historic filings in order to identify and address any gaps or errors.
Buyers should, again, treat this as a key area of legal due diligence to identify discrepancies or outdated information.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, April 2025
International trends in private capital investment
Join our free webinar on Monday 12 May, which will cover what successful M&A and business exits look like in 2025, and how key UK and global trends are shaping dealmaking strategies in a rapidly evolving market.
