torstai 25. elokuuta 2016



A schedule of the items of plant and machinery which are part of the sale is usually attached to the acquisition agreement. A buyer who wishes to purchase all of the assets needed to run the business may seek to safeguard itself by providing that plant and machinery  ‘used in the business’ are to be transferred,  including but not limited to those items listed in the schedule. Thus items forgotten or omitted from the schedule by will stillbe included in the sale.

Insure the plant and machinery

The buyer will normally assume risk on the plant and machinery when the acquisition agreement is executed and should get insurance cover from this date, even if completion is delayed.


As a buyer you should ask to include the following warranties as to the condition of the items of plant and machinery:

(a)    they are in a proper state of repair and condition and in satisfactory working order;

(b)   they have been properly and regularly maintained

(c)    they are adequate for (and not surplus to) the need of the business.

(d)   they are not dangerous, obsolete or in need of replacement;

The seller should be careful before agreeing to these warranties and try to restrict any liability to major defects.

perjantai 22. tammikuuta 2016

Mergers and acquisitions in Finland; what can go wrong?

In the past few years I have seen many great cross border acquisitions; most of them great successes. But it’s worthwhile to have a look at  missed opportunities and learn a lesson of the past failures. I have tried to summarize what usually goes wrong.

1)      A business acquisition is a major investment and decisions for such large projects need to be properly validated to minimize the business risks involved. This is not a legal issue but why acquire a company if you are not convinced of the profitability. You would be surprised how often these kinds of studies and validations are neglected even by multinational companies. We were recently able to prevent  such a tragic mistake from happening by being able to show that the business was no longer profitable in Finland due to changes in the legal and subsidiary framework.

2)      Tax considerations are sometimes poorly dealt with by small and medium sized companies. You should bear in mind that when acquiring shares in a company there is an added layer of complexity which arises from the fact that the buyer is acquiring an entity with a tax history and attached liabilities. As the tax climate hardens buyers should conduct thorough due diligences regarding their targets’ tax affairs and be sure to negotiate appropriate indemnities and warranties as part of any deals. This goes also with the target company’s compliance related to value added tax (VAT ) and other indirect taxes.

3)      When planning the fiscal aspects of your financing you should not always trust past experiences.  Many countries are working to increase tax revenue, shore up their tax bases and curb aggressively financed M&A transactions. In many countries e.g.  the non-deductibility of  interest has emerged as a common legislative means of eliminating the tax benefits of cross-border debt financing structures. Today’s truth may not be that of tomorrow.

4)      The buyer should cover all its legal bases and get a thorough assessment of possible legal risk. I have seen cases with costly and large due diligence reports consisting of copies of the due diligence  material. Little do they serve the buyer’s interest if there is no assessment. A clear analysis of the existing employment contracts is also vital as the Finnish labour laws can become a costly affair for the buyer.

5)      Try to persuade your counterpart to acquire knowledgeable legal advice as well. It saves a lot of the buyer’s time and money if the seller is represented by a business-minded professional who knows his trade.

It is money well spent to have appropriate advisors at one’s side to help avoid pitfalls by tackling them early on at the negotiation table. The earlier the better  - and  usually a lot less costly.