RMIT LAW1050 Report: Advice on Mergers and Acquisitions Transactions

This report addresses a legal assignment concerning mergers and acquisitions, specifically focusing on advising Wesfarmers regarding the potential acquisition of Afterpay. The report outlines key transaction steps, including planning, team building, research, offer making, and contract writing. It details the necessary documentation, such as non-disclosure agreements and purchase agreements. The report then explores the factors to consider when acquiring a business or shares, differentiating between asset and share transactions. Furthermore, it emphasizes the importance of due diligence, recommending thorough examination of financial records and other confidential information. The report concludes with a checklist for Wesfarmers to ensure a successful acquisition, providing a comprehensive overview of the legal and practical considerations involved in mergers and acquisitions.

Running Head: MERGER AND ACQUISITIONS
MERGERS AND ACQUISITIONS
Name of the Student
Name of the University
Author Note

1MERGER AND AQUISITIONS
Letter of Advice
To,
General Council
Wesfarmers Group
Subject: Regarding giving advice related to documentation of Acquisitions and
Recommendation of transaction.
Dear Sir,
Merger and acquisitions are described as consolidation of the companies. Merger is
combination of two firms for forming one, while acquisition is described when one firm is
taken over by another. M&A is major aspects of the corporate finance world. This letter is
prepared with the intention to advice regarding entering and preparation of documentation, if
business has to be acquired by another business.1 Further, this letter includes the discussion
on factors that is required to be taken, when considering regarding acquisition of business or
shares of company. Lastly, recommendation will be given on due diligence.
Key Transaction Steps
 Making plan: This step includes looking for the reasons for buying a company. It
consists of finding the new markets, industry rolling-up strategy, getting the advanced
technology, market window strategy, getting the new personnel, synergy strategy and
strategy of geographic growth. Further, it also includes eliminating competition,
adjacent strategy of industry, diversification strategy and vertical integration strategy2.
1 Vivek Ghosal and D. Daniel Sokol, "Compliance, Detection, And Mergers And Acquisitions"
[2013] Managerial and Decision Economics.
2 Eliezer M. Fich, Tu Nguyen and Micah Officer, "Large Wealth Creation In Mergers And Acquisitions" (2018)
47(4) Financial Management.

2MERGER AND AQUISITIONS
It includes focusing on aspects of company, which is most valuable to the client and
shaping one’s offer around benefit.
 Building Acquisition Team: It includes building the team, which fulfills the roles of
executive manager, investment banker, acquisitions lawyer, expert of HR, IT
specialist and the public relations officer. These people works for providing merger to
public. It informs the customers and business partners about new merger.
 Research and Due Diligence: It includes two phases. At first stage public
information about company is checked to see if company fits the plans. Further, the
second stage includes meeting management of company and using the information for
answering the questions about products, staff, culture and more3.
 Making first offer: This includes making better first impression with the perfect
positive negotiations by the fair price offer.
 Negotiating Terms: This includes reaching agreement that ends in good merger of
the two countries.
 Write Up a Contract: The contracts are not end of the negotiations. The contract
lawyer records the negotiations.
Documentations Required
Wesfarmers Group wish for the acquiring the business. This requires Wesfarmers for
disclosing their intention and interest towards acquisition of Afterpay4. Further, this will also
help AfterPay for getting idea regarding intention of Wesfarmers. Hence, the documentation
required to be prepared during acquisitions includes following:
3 Chikashi Tsuji, "An Overview Of The Cross-Border Mergers And Acquisitions" (2015) 3(2) Archives of
Business Research.
4 Afterpay.Com (Webpage, 2019) "Home - Afterpay - Shop Now. Enjoy Now. Pay Later.",
<https://www.afterpay.com/index>.

3MERGER AND AQUISITIONS
 Non-Disclosure Agreement: This document is prepared for making sure that all the
information considered to be confidential will not be shared and treated carefully.
 Letter of Intent: The letter of intent states the intention on buying firm, after
considering that business is worth and signing non-disclosure agreement.
 Confidential information Memorandum: The memorandum of confidential
information provides prospective buyer with the information for the initial offer. Most
commonly, it is also referred as the book and it includes summary of the business
operations, financial information, summary of auction process and summary of
market and industry opportunities.
 Indication of Interest: This document is prepared for expressing interest in making
the deal in vague. This is formal written offer.
 Purchase Agreement: The client and seller formalizes the agreement in required
legal contract5.
Factors to Consider for Acquisition of Business or Shares of Company
The acquisitions can be planned as either through transaction of asset or through transaction
of stock. When asset transaction is being favored then there are number of issues that have be
considered. Further, when transaction is structured as the acquisition of stock then by its
nature, the acquisition results in transferring of ownership of the organization itself. Further,
the entity continues to possess same assets as well as have same liabilities6.
5 JAN BENA and KAI LI, "Corporate Innovations And Mergers And Acquisitions" (2014) 69(5) The Journal of
Finance.
6 Regulatory Affairs and Corporations (Cth), "Corporations Act 2001 (Cth) - Government Regulations - Content
- IAB Australia", Iabaustralia.Com.Au (Webpage, 2019)
<https://www.iabaustralia.com.au/regulatory-affairs/government-regulations/item/44-government-regulations/
2132-corporations-act-2001-cth>.

4MERGER AND AQUISITIONS
 Assets Transaction: Under this, sellers remain legal owner of firm, while the buyer
purchases company’s individual assets such as goodwill, equipment and others. This
type of sale is characterized as debt-free and cash-free. Hence, if Wesfarmers Group
opt for this option then there will be the advantage of major tax benefit, the
amortization of goodwill can be on straight-line basis and there are lot more benefit
from this.
 Shares Transaction: It includes buying stock of the target and taking target as it finds
in regards to liabilities and assets. Moreover, most of the contracts of target is
transferred to the new owner. Hence, if Wesfarmers Group goes with this option then
they don’t have to bother with retitles of the individual assets and costly revaluations.
The transfer taxes can be avoided, as this method is simpler than that of the asset
acquisitions7.
Due Diligence
The due diligence is essential activity in transactions of acquisitions. This helps in allowing
the buyer for confirming pertinent information about seller. Generally, due diligence is
commenced when letter of intent is signed. It investigates the company’s areas such as
financial records, intellectual property, assets conditions, contracts of customer, internal
procedures and system and employees’ benefit, compliance and policies issues.
The recommendations that should be given to Wesfarmers Group is to check the financial
results of the AfterPay. Wesfarmers should do thorough study of the published annual
financial statements of company, its disclosures, public filings and other important
7 Harry Gray, Chad Greenway and Robert Feeney, "Portfolio Company Best Practices—Post-Acquisition
Transition: Preserving Customer Relationships When Company Founders Depart" (2015) 19(1) The Journal of
Private Equity.

5MERGER AND AQUISITIONS
documents that may affects the decision of acquirer. This will help the acquirer to have
successful acquisition of Target Company8.
Checklist
 Annual Reports- This report is required for reviewing current financial position of
company. The present performance of company can be compared with the previous
years.
 Assets: In case, if assets of Afterpay is purchased then it is required to know about the
assets that are on offer.
 Shares: In case of choosing the option of purchasing shares, it is required to know
about the shares that are offered.
 Other Confidential Information: It includes going through the confidential
information of company. This will help the acquirer to gain better understanding
about the company it is going to acquire.
Kind Regards,
XYZ
8 Naclc.Org.Au (Webpage,2019)<http://www.naclc.org.au/resources/List%20of%20Subscriptions%20Lexis
%20Nexis%20Dec%202011.pdf>.

6MERGER AND AQUISITIONS
Reference
Affairs, Regulatory and Corporations (Cth), "Corporations Act 2001 (Cth) - Government
Regulations - Content - IAB Australia", Iabaustralia.Com.Au (Webpage, 2019)
https://www.iabaustralia.com.au/regulatory-affairs/government-regulations/item/44-
government-regulations/2132-corporations-act-2001-cth
Afterpay.Com (Webpage, 2019) "Home - Afterpay - Shop Now. Enjoy Now. Pay Later.",
https://www.afterpay.com/index
BENA, JAN and KAI LI, "Corporate Innovations And Mergers And Acquisitions" (2014)
69(5) The Journal of Finance
Burcheri Haghnejad, Daniel, "Special Purpose Acquisition Company (SPAC): Approche
Juridique D'un Véhicule D'investissement Atypique (Special Purpose Acquisition Company
(SPAC): Legal Approach To An Atypical Investment Vehicle)" [2019] SSRN Electronic
Journal
Fich, Eliezer M., Tu Nguyen and Micah Officer, "Large Wealth Creation In Mergers And
Acquisitions" (2018) 47(4) Financial Management
Gray, Harry, Chad Greenway and Robert Feeney, "Portfolio Company Best Practices—Post-
Acquisition Transition: Preserving Customer Relationships When Company Founders
Depart" (2015) 19(1) The Journal of Private Equity
Naclc.Org.Au (Webpage,2019)http://www.naclc.org.au/resources/List%20of
%20Subscriptions%20Lexis%20Nexis%20Dec%202011.pdf
Tsuji, Chikashi, "An Overview Of The Cross-Border Mergers And Acquisitions" (2015)
3(2) Archives of Business Research