Road book on mergers and acquisitions in Belgium (part 1)
- Mathieu Maniet - Leo Peeters
- Corporate Law and M&A , Insolvency Law
- M&A , mergers and acquisitions , preliminary agreement , structuring the M&A
Business acquisitions in Belgium are most often structured as an acquisition of shares in
limited liability companies. However, similar transfers can also be carried out as assets
The main characteristics of both techniques and the differences between them have already been described in an earlier contribution on our website, that you can read by clicking here.
An asset deal is the prevailing alternative in situations where a share deal would not be optimal, for example in the following situations:
In Belgian private M&A transactions, the predominant form of consideration is cash. However payment in shares or a combination of shares and cash are also permitted and frequently used.
A Belgian private M&A transaction may be accomplished by negotiations directly between the
seller and the purchaser or, in case of a share deal, also by a controlled auction where the seller
invites several prospective purchasers.
A controlled auction normally includes the following steps:
At an early stage of the process, the parties may conclude a letter of intent (“LOI”) or similar
pre-contract to facilitate the further negotiations. LOI’s are typically non-binding agreements
setting out general terms for the process to draw up the main lines for the future negotiations.
Other terms, such as “memorandum of understanding” and “heads of agreements” are also frequently
used to describe pre-contract agreements of this kind.
LOI’s and similar pre-contracts are widely used in Belgium.
They may include statements on :
The level of commitment of the parties to complete the transaction may differ.
However, parties should take into account that under Belgian law an agreement has in principle binding force as soon as the parties agree on the price (or the calculation thereof) and the object of the transaction. Parties may nevertheless deviate from this rule, but this should be explicitly stated in the LOI or similar pre-contract.
Parties may explicitly deviate from the rule that an agreement has in principle binding force as soon as the parties agree on the price
To avoid any possible conflicts in case the transaction would not go through, it is strongly
recommended to approach this deviation and its implementation (i.e. drafting such clauses) with the
highest level of care. Some key provisions such as confidentiality, governing law and dispute
resolution, non-solicitation, exclusivity and return of documentation are, however, normally made
A mere exclusivity agreement may also be concluded.
As the number of possible purchasers involved in each controlled auction has increased in the last years, bidders tend to find exclusivity even more important. Sellers, on the other hand, often strive to keep as many potential purchasers as possible in the process.
If an exclusivity agreement is concluded, it usually contains a clause giving the seller the opportunity to withdraw from the exclusivity commitment in the event that the process makes limited progress (after giving the potential purchaser notice and the opportunity to resume the process).
In some auction processes, exclusivity agreements can also contain various provisions that are typically included in an LOI, such as conditions for the conclusion of a future sale and purchase agreement.
Furthermore, the parties often enter into standalone confidentiality agreements more elaborate than the equivalent provisions that may be included in e.g. an LOI.
More chapters to come ...