The main difference in market practices is the allocation of risks. Under the paradigm of the British market, economic risk is assumed to shift from a seller to a buyer at the time of the execution of a share purchase contract (“SPA”), whereas, according to the paradigm of the U.S. market, economic risk is considered a transition after the acquisition of a target company. This difference is reflected in the level of account security, the approach to price mechanisms and the margin of liability after the acquisition of an SG in the UK and US markets. In particular with regard to financing and, as mentioned above, a British/European seller will often require a buyer to proceed on a “defined fund basis”. In practice, this means that the buyer must be able to prove the availability of financing before the transaction is completed and that a seller will not allow the buyer to withdraw from the transaction after signing an agreement, even if its lenders decide not to finance the acquisition. In some cases, particularly where the buyer`s original jurisdiction imposes capital controls on the flow of funds from that jurisdiction, a seller may even require the buyer to pay a down payment or place a small percentage of the purchase price on a fiduciary account when the transaction is signed. Such funds expire when the buyer is unable to complete the transaction. Although market practices are increasingly coordinated in the United Kingdom and the United States, some important distinctions remain (including safeguards, representations and disclosure). The U.S. and English courts have chosen different approaches to the interpretation and application of certain provisions of purchase and sale contracts, which can have a significant impact on the distribution of risk between buyer and seller.
Differences between the underlying legal considerations must be taken into account by the parties to a transatlantic transaction. As AMs develop internationally, historical differences between practices in the United Kingdom and the United States are narrowing. The vagaries of the underlying legal considerations in each of the legal systems are partly responsible for the differences, but habit and practice play an important role in the design of the form and substance of share purchase contracts in Britain and the United States (or, to use the UK nomenclature, share and sale contracts). This comment focuses on the differences in the following areas: While in the U.S. locking mechanism is used, it is even more common to use closing accounts as a pricing mechanism for private transactions in the United States. In other words, the buyer would pay a purchase price at the close of the transaction, calculated on the basis of an estimate of working capital or net assets of the target at closing. The financial statement accounts would then be established by the purchaser during the period following closing to determine actual labour capital or net assets, adjusting the purchase price to reflect the difference between actual working capital or net assets and estimated working capital or net assets. As a result, the purchase price paid to the seller at closing may be adjusted after closing and there may be a dispute between the parties as to how these adjustments are made. Under a UK/European procedure, the security of transactions is generally greater for a seller: as a general rule, transactions are subject to a very limited range of transaction terms, and a seller (unless he is in a weak trading position) only accepts the terms of conclusion required under current legislation or regulations (for example). B, obtaining compulsory approvals for cartels and abuse of dominance or, for a UK premium buyer, shareholder agreement in a Class 1 transaction in accordance with UK listing rules).