Preliminary agreements

What preliminary agreements are commonly drafted?

Early in the negotiation process, the parties enter into a non-disclosure agreement to ensure confidentiality of information made available to the buyer for the purpose of assessing the transaction.

Further, a non-binding document (ie, a letter of intent) outlining the main terms of the acquisition is usually entered into. The letter of intent often includes certain binding terms, such as exclusivity, transaction expenses and confidentiality.

Principal documentation

What documents are required?

Bidders express their interests in acquiring targets via letters of intent (either non-binding or binding). In addition, the following agreements are usually entered into with respect to M&A transactions:

  • a non-disclosure agreement; and
  • a share purchase or asset sale and purchase agreement.

Additional documentation may be required depending on the nature of the transaction (eg, a non-competition agreement, a transition services agreement, an escrow agreement or an agreement aiming at conveying specific assets).

Which side normally prepares the draft?

In general, the buyer prepares the first draft. However, if the seller (with its adviser) runs an auction sale, it will likely prepare the first draft and communicate it to potential buyers.

What are the substantive clauses that comprise an acquisition agreement?

Under French law, an acquisition agreement includes the following:

  • a detailed description of the parties’ intent;
  • a specification of what is included in the acquisition;
  • the purchase price and payment terms;
  • conditions precedent and closing conditions;
  • representations and warranties;
  • indemnification and remedies (including a statute of limitations);
  • the costs and charges of the different parties; and
  • details of the governing law and dispute resolution.

What provisions are made for deal protection?

As mentioned above, the parties will seek to secure the confidentiality of the provided information through a confidentiality agreement.

Closing documentation

What documents are normally executed at signing and closing?

The parties will normally execute a sale purchase agreement, setting out the terms and conditions purporting to the sale and purchase of the target’s shares. On fulfilment of all condition precedents (eg, approval of the transaction by the relevant regulatory authorities) the acquisition will be complete. Documents signed after this phase (ie, at closing) will likely include the closing deliveries of the buyer (eg, bank undertakings and minutes of the shareholders approving the sale) and the seller (eg, share transfer forms and wire transfer certificates regarding the transfer of the purchase price).

Are there formalities for the execution of documents by foreign companies?

French law requires no particular formalities for the execution of documents by a foreign company. 

Are digital signatures binding and enforceable?

To be enforceable under French law, a signature in electronic form must apply a reliable process of identification, proving the relation to the document to which it is attached. In practice, physical signatures are preferred.

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