We are often asked to work with a company or a business to make it ready for sale or to receive an incoming investment, whether by equity injection or by way of a loan.
You may be thinking of selling your business, or you may be about to enter into a joint venture arrangement or merger with another company. In any of those circumstances, you will want to know that your business (and we use the term “business” to include an unincorporated activity or a limited company) is in good order.
Sometimes the instruction is to prepare an information memorandum on the company or to prepare a data room of information, and to provide a confidentiality or non disclosure agreement so that access to that data room – or to the information memorandum – can follow the signature by an interested purchaser of the confidentiality agreement.
The confidentiality agreement is sometimes accompanied by a “lock-out” or exclusivity agreement; that is to say an agreement under which the vendor agrees not to treat with any other potential purchaser for a specific period. The attraction to a purchaser or investor is that he knows that he has enough time to carry out his own due diligence, and that there is less likelihood of his professional fees being wasted.
The actual composition of any information memorandum or of any pre-sale investment report follows the lines (in mirror image) of the due diligence exercise on behalf of a purchaser. Time and fees are saved.