Conditions precedent on acquisition finance transactions — general considerations

In addition to negotiating the finance documentation and coordinating their interplay with the other elements of the transaction, the role of the law firms in an acquisition finance transaction will include managing the process of satisfying the conditions precedent.

This guidance note addresses the following in the context of acquisition finance transactions:

• • the purpose of conditions precedent;
• • key types of conditions precedent; and
• • the process of satisfying conditions precedent.

See Conditions precedent on acquisition finance transactions — general considerations.

Conditions precedent on acquisition finance transactions — documents table

This guidance note contains specific information on conditions precedent in an acquisition finance transaction along with some more general information on conditions precedent.

The following conditions precedent (“CPs”) will normally be included as a minimum:

• • constitutional documents of each obligor;
• • corporate resolutions of each obligor;
• • a certificate containing various confirmations from (usually two) directors;
• • legal opinions (typically issued by the financiers' counsel in Australia);
• • executed finance documents including the facilities agreement(s) itself, the intercreditor agreement, security documents, fee letters, hedging letter or hedging agreements;
• • acquisition documents, such as the acquisition agreement;
• • equity documents, such as the shareholders' agreement, constitution of Topco and loan note documents (if applicable);
• • ancillary matters relating to security;
• • due diligence reports;
• • funds flow statement and confirmations as to the equity finance being in place; and
• • confirmations there are no unsatisfied conditions to the acquisition agreement.

See Conditions precedent on acquisition finance transactions — documents table.

Reviewing acquisition documents

This guidance note addresses some points of interest for lawyers for the lenders when reviewing specific acquisition documents. In more general terms, lawyers at this stage will check that:

• • the companies and/or assets being acquired accord with what the lenders are expecting;
• • the acquisition documents contain sufficient or typical contractual protections to protect the target group against unforeseen financial burdens; and
• • the acquisition documents deal with any key issues arising from disclosure and the due diligence process.

See Reviewing acquisition documents.

Reviewing equity documents

The equity documents on an acquisition finance transaction will normally be negotiated between the sponsor, any other equity investor and the management team, with the lawyers for the lenders having the right to review and comment on the drafts.

This guidance note discusses the key considerations for lenders’ counsel when reviewing the main equity documents in an acquisition finance transaction, including:

• • the constitution of the top company in the group structure (Topco);
• • the shareholders' agreement, also known as the investment agreement or subscription agreement;
• • service contracts and bonus scheme documents;
• • shareholder subordinated loan agreement(s); and
• • downstream loan agreement(s).

See Reviewing equity documents.

Instructing and managing foreign counsel

Given the cross-border nature of many acquisition finance transactions, it is common for the principal legal advisors for lenders and borrowers to need to instruct foreign lawyers to provide advice on foreign law.

This guidance note gives practical advice on instructing and managing foreign counsel and covers:

• • the role of foreign counsel;
• • instructing foreign counsel as principal legal advisers for the lender or borrower; and
• • the role of the principal legal advisers in managing foreign counsel.

See Instructing and managing foreign counsel.