The challenge
This substantial cleaning and security business was being sold to a large, privately-run business in the facilities management sector.
As the sale progressed we advised the senior leadership team on a number of specific requirements, including the negotiation of locked-box arrangements alongside a very unusual earn-out based on post-completion performance following a merger of the buyer’s and sellers’ businesses. We also had to resolve some problems from a previous restructuring which had the potential to derail the deal.
Our work
Together with the firm’s other advisors, we created a clear strategy to address all of these issues for the benefit of both parties. This included negotiating:
- the terms of the locked-box (including carve-outs from provisions to allow transfer to the sellers of certain assets they wanted to retain) and the earn-out;
- significant concessions from the Buyer around seller limitations which departed from their normal practice;
- different restrictive covenants for different sellers, allowing those who needed to continue to work post-transaction much more flexibility in finding new employment than those who would be retiring;
- structuring an innovative earn-out mechanism which gave the Sellers comfort that the earn-out would be achievable after completion.
Throughout the disclosure process we made sure that the clients understood what the warranties meant and therefore what needed to be disclosed.
Our impact
Although this was a complex and protracted negotiation, all of the issues were resolved with care and sensitivity in the knowledge that the senior leadership team would be remain working within the acquiring company. The enlarged business continues to go from strength to strength.
