In private M&A transactions in South Africa where there is an anticipated substantial time gap between the signing of the agreement and its closing, parties often agree on interim period undertakings.
These undertakings serve to protect the value of the target business or company.
They typically include provisions preventing the seller from concluding major transactions, incurring significant liabilities, making significant personnel changes, or distributing profits to shareholders during this interim period without consultation with and/or the written permission of the purchaser.
Typically, the seller commits not to engage in any transactions that deviate from the ordinary course of business.
However, where competition approval is needed, parties must be cautious not to grant the purchaser undue influence over the business, as this could be perceived as de facto control before obtaining the necessary approval.
In such a case in order to safeguard its interests, the purchaser may seek remedies such as post-closing adjustments to the purchase price, warranties confirming no unauthorized actions during the interim period, and the option to attend target board meetings as an observer.
These measures help mitigate risks and ensure the deal's success.