Agnieszka Blaszczyk, Group Partner (AB), and Oliver Hughes, Associate (OH) of Pinel Advocates discuss the latest developments and trends in relation to local business sales and acquisitions.

Pinel Advocates is a boutique Jersey law firm that advises on a range of corporate, commercial and private client matters for local businesses and for international clients that own Jersey corporate and trust structures in Jersey. In 2014/2015, Pinel Advocates, led by partner Andrew Pinel, advised on a number of high profile Jersey business acquisitions.

What sort of activity have you seen over the last year in Jersey in respect of business sales and purchases?

AB: 2014 and 2015 has showed further growth in the numbers of sales and acquisitions, across all business sizes, for regulated and unregulated businesses and those based solely in Jersey and internationally.   Pinel Advocates advised purchasers and sellers on acquisitions of trust company businesses and other entities licensed by the Jersey Financial Services Commission, as well as business sales spanning several industries such as retail, IT, hospitality and financial support services. With the local and international business environment to continue its recovery through 2016, we expect the trend to continue and more sales and purchases to take place in the coming months.

What are the types of legal issues that Jersey businesses face when acquiring other companies?

OH: The size of an acquisition and the complexity of the negotiations surrounding the purchase will impact on the types of concerns that will arise.  In general, businesses should be aware of potential issues relating to, amongst other things, employment law, property law, financial services regulation, governmental consents and competition regulation.

What issues arise when dealing with employees as part of a business purchase?

AB: Any Jersey business acquiring additional employees as part of a purchase must consider the impact of Jersey employment legislation and must manage the integration of those employees carefully.  Unfortunately, redundancies can also be a consideration and purchasers should ensure that employees are treated properly and that correct procedures are implemented, even if they are completing a business purchase as opposed to a share purchase of the entire company.

Practical changes to the business may need to be implemented such as updating the Purchaser’s contracts of employment, staff handbook and internal policies to reflect the changes in the business.

What should a Purchaser consider when property forms part of an acquisition?

OH: When purchasing premises or taking on commercial leases as part of an acquisition, businesses should be aware of relevant Jersey property law issues that may arise.  For instance, Purchasers should ensure that they will have the necessary licenses, landlord consents and property contracts in place at the completion of the purchase. Purchasers and their advisors will usually conduct relevant property searches and carry out a physical inspection of the new premises. 

Purchasers should carefully review any restrictive covenants, licensing restrictions or provisions of insurance contracts in relation to the property that would prevent the Purchaser from using the property in the manner that they wish.

What regulatory factors should Purchasers be aware of?

AB: Purchasers need to commence early dialogue with the Jersey Financial Services Commission if they are considering purchasing financial services businesses.  There can be complications, such as the licensed business’ current standing, any regulatory or enforcement action or proposed ownership by new or non-Jersey owners.

Target companies carrying out certain activities, for example investment business or trust company business, should have been granted relevant licences, permits and insurance in order to carry out the relevant type of activity and Purchasers should ensure that any target has the necessary regulation consents in place.

OH: Where regulated financial services business is acquiring a target with toxic assets or litigation is ongoing over some of the target’s assets, the Purchaser may wish to only acquire the parts of the business from the target that have any value.  However, this task should be undertaken carefully in order to try to foresee any and all future liabilities or claimants, always with full disclosure of the structuring to the Jersey Financial Services Commission.

Do all business sale and purchases fall within competition regulation?

OH: No, not all sales require competition law consent from the Channel Islands Competition Regulatory Authority, but the subject should always be considered.  For larger business purchases where, following the take-over, the purchasing entity will own a substantial market share, the Purchaser is likely to need prior consent and should be aware of the timescales for notification and consultation around this process.  The scope of CICRA’s role is wide and therefore parties can be surprised that purchases that appear small still require prior consent.  Pinel Advocates assists with this process and can advise clients early on if CICRA consent is necessary.

What other research should purchasers undertake?

AB: We advise that potential purchasers carry out sufficient and relevant due diligence so that they fully understand the nature of the business that they are purchasing, but in practical terms the due diligence is often pitched to the size of the business, with varying degrees of risk accepted.  For a complex, high-value transaction this may mean a full and extensive in-depth review of all documentation and contracts entered into by the target company.  For smaller businesses, a broader view may be taken and certain aspects of the due diligence not undertaken with the understanding of the risks associated with that.

How do you see the market for 2016?

AB: We believe that the trend of consolidation, through acquisition will continue across all market sectors.  Pinel Advocates’ experience in assisting businesses of all sizes, coupled with our ability to be accessible and fast-moving, will mean that we are well-placed to building on this growing part of our business.