top of page
Search

When it comes to structuring private M&A transactions in South Africa, there are three primary...

Writer: Priyesh ModiPriyesh Modi

When it comes to structuring private M&A transactions in South Africa, there are three primary options available to the parties: selling the shares of the target company from the vendor shareholders to the acquirer, selling the business of the target company (or a portion of it) to the acquirer, or pursuing a merger/amalgamation.


When assessing these choices, parties typically prioritize simplicity, speed, and tax efficiency.


The sale of a business transaction is possibly the most common choice in South Africa because it allows the purchaser some latitude to selectively acquire the desired assets while assuming specific, well-defined liabilities.


It also allows the purchaser to take the assets in at its cost of acquisition, but it can result in recoupments for the seller on assets that have been tax depreciated to below their market value.


While cash is the typical form of consideration in business acquisitions, it's not unusual for shares of the purchaser to be included as part of or an alternative to a cash consideration.


Provisions tying a portion of the consideration to future profitability, known as "earn-outs," are also frequently seen.


South African acquisition agreements often also include holdback arrangements, where a portion of the purchase price is withheld as security against potential claims the purchaser may have under the agreement.


 
 

Recent Posts

See All

Pledge

In South Africa, security over financial instruments is typically established through a pledge, cession in security, or a combination of...

Delegation of Authority

Directors often delegate certain functions and tasks to company employees or rely on the advice of experts. However, under South African...

Suretyships and Guarantees

In South Africa, banking and finance transactions often involve suretyships and guarantees. A guarantor's obligation depends on what the...

Advaya Consulting B-BBEE Level 1 Contrib

© 2024 Advaya Consulting

Services

Corporate & Commercial Law
Popia Compliance
Mergers & Acquisitions
Corporate Governance
Joint Ventures
Compliance & Regulatory
Private Equity
Public-Private Partnerships
Broad-Based Black Empowerment
Employment Law

Bradenham Hall - North Block

7 Mellis Road

Rivonia

Johannesburg

Tel: +27 (11) 807-9380

Advaya Consulting LinkedIn profile
bottom of page