I was asked in mid-October to act for the owners of a registered training organisation (RTO) to assist with its sale. A basic term sheet had been signed with the buyer and they both wanted to complete before the end of the month. Due diligence was underway, but unfortunately there was not a confidentiality deed in place. That was the first item to address.
Next was preparing the share sale agreement (SSA). The broker had a version of a SSA that was tailored to the peculiar RTO regulatory environment. That needed just a bit of a shift to be a little more in the seller’s favour, a tad (!) of tightening, including adding some warranties from the buyer and addition of a buyer’s guarantor. It also required a mechanism to calculate and adjust for the net position vis-à-vis receivables and payables, provision for a tax estimate for trading up to completion and otherwise allowing the seller to dividend to itself the net cash/profit out of the company.
The buyer didn’t appoint a solicitor until 3 days before scheduled completion (not so helpful). Those solicitors then sought a range of changes (many of which were agreed), but also a $50,000 holdback to address a variety of issues and also sought a range of liquidated damages based on perceived technical compliance issues in the RTO regulatory framework. This broad hold back was resisted, although a 10k holdback was agreed for 30 days just to cover if there were additional debtors than were adjusted for. We also resisted the request for liquidated damages, principally because the seller was very on the ball and could quickly address the technical issues raised or could demonstrate that the perceived issues really had no merit and that not hold back was appropriate.
The share sale agreement was signed on 30 October with completion following later in the day (but critically, before the end of month). The buyer and its solicitor were located in Melbourne and the seller in Brisbane (and me on the Gold Coast). Completion occurred by the exchange of a scan of the share transfer and other documents, with original documents to be exchanged in due course.
Besides successfully completing a transaction within a compressed timeline, there is one other very gratifying aspect to assisting the sellers. The sale was for a generous six-figure sum. I have never met the sellers face to face, but they are a husband and wife team. I am not privy to their financial position but receiving a generous six-figure sum has to help them and their family get ahead in life. Of course, that payday was for many years of hard work and running a successful and profitable business.
Total legal fees will be south of $10k, and roughly 1.5% of the transaction value.