CONTACT

Mergers and Acquisitions (M&A) in Belgium

Back to International Desk

To expand your company’s operations into Belgium, it may be interesting to acquire a Belgian company. An acquisition is an extensive process, especially when it takes place across borders. We advise and assist foreign entrepreneurs and investors during the acquisition of a company in Belgium, from the beginning of the process, such as drafting the non-disclosure agreement (NDA) and the letter of intent (LOI), during the due diligence, as well as during the negotiation and conclusion of the contract (closing) or post-closing discussions. Our experienced M&A team is at your side throughout the acquisition process and has already proven time and again that it can provide quick and result-oriented support for acquisitions in Belgium.

Our offer in the context of business acquisitions in Belgium includes:


We thus support our clients throughout the acquisition process, from preparation (NDA, LOI & due diligence) to negotiation and execution of the acquisition agreements.

Procurement structures

An important step in the acquisition process is choosing between a share deal (acquisition of shares) and an asset deal (acquisition of assets).

A share deal involves an acquisition of shares in a company, i.e. of the entire company with all its assets and liabilities. Licences, loans, contracts and liabilities are retained, which requires a thorough due diligence.

In contrast, in an asset deal, you only take over a specific component of the business, such as machinery, buildings or an entire business department. Here, it is important that the assets and liabilities to be taken over are clearly described in the acquisition contract.

In practice, we find that a share deal is chosen more often than an asset deal as they are generally less complex. We see that, in principle, an asset deal is only preferred in transactions where the target company is in financial difficulties (distressed M&A) or when one only wants to acquire a specific branch of a company. An asset deal is generally more complex, usually has far-reaching tax implications and often requires the cooperation of third parties.

Non-disclosure agreement (NDA)

In the preparatory phase of an acquisition, the parties will first get to know each other (better) and probe whether a transaction is feasible and desirable. As part of this, sensitive information (e.g. the business model) will be disclosed. To prevent a potential buyer from simply breaking off negotiations and walking away with this sensitive information, it is important to conclude a non-disclosure agreement (NDA) in good time and prior to the start of these information exchanges and negotiations.

The NDA regulates what the sensitive information may or may not be used for and what the consequences of any breach of the conditions are (such as compensation for damages), ensuring the confidentiality of this sensitive information. The non-disclosure agreement may also possibly already include an exclusivity clause or rejection prohibition.

Letter of intent (LOI)

If the initial discussions and information exchange indicate a potential acquirer is interested in acquiring the target company, the parties can proceed more concretely to enter into a letter of intent (LOI), also known as a memorandum of understanding (MOU).

A letter of intent serves as preparation for the final acquisition agreement and sets out the intentions of the buyer and seller about the acquisition. It usually includes the main modalities of the transaction (Key Terms such as e.g. the pricing mechanism), as well as the further course and timing of due diligence and negotiations. The parties decide to what extent the agreement is binding or not. This agreement reinforces the trust between both parties to want to negotiate seriously and generally creates additional confidentiality.

Due Diligence in Belgium

With any transfer, an audit is essential (the so-called due diligence), especially for the potential acquirer. The latter will of course want to know the company’s financial, legal and tax position, whether any claims from the past are expected, what the prospects are, the legal status of current contracts, employment agreements, the intellectual property situation, the approach to personal data protection, etc.

Based on a due diligence questionnaire, key information is made available by the seller in a virtual ‚data room‘. This information allows you to better understand the target and analyse the associated risks and opportunities.

A due diligence helps you, as a prospective acquirer, to assess the value of the business and the risks and ensures that you know exactly what you are acquiring and that the necessary safeguards and guarantees are laid down in the acquisition agreement.

Valuation of the target

When acquiring a company, the focus is often on the purchase price. Various methods are possible for the concrete valuation of a company. For example, in practice, the multiple method is often applied, where the enterprise value is determined by multiplying a financial indicator (such as turnover, EBIT or EBITDA) by a market multiplier. Another valuation method consists of using shareholder value as a starting point, where the enterprise value is adjusted by the net cash/debt position.

Next, it is important to agree on the timing of the valuation. There are two common methods to determine the time for determining the purchase price in acquisition practice:

  • Locked Box method: Determines the final acquisition price based on a historical balance sheet of the company and therefore on the financial situation of the company at a time prior to the closing. With this method, it is very important to determine which withdrawals from the target are and are not allowed until the closing date (permitted and prohibited leakages).
  • Closing accounts method: Determines the price based on the balance sheet on closing date. As there is no final balance sheet on closing date, it is based on the most recent figures and an estimate of the situation on that day. The final purchase price is determined only after closing, based on a final balance sheet prepared within a few months of the transaction.

Acquisition agreement

In a share deal, the agreement usually follows a standardised template. This includes the identification of the parties involved, the number of shares to be transferred, the price, method of payment, warranties and guarantees and the date of transfer. Post-closing obligations and general provisions are also often included.

Safeguards and guarantees
It is important that, based on the results of the due diligence, you include sufficient safeguards and guarantees. This provides protection against unexpected problems after the acquisition. In fact, these safeguards and guarantees oblige the seller to be transparent about the business and ensure that its statements are accurate. For example, warranties and guarantees are usually included regarding the ownership of shares, the accuracy of the figures presented, intellectual property, insurance, taxes, pending disputes, etc.

Liability and risk allocation
In principle, the seller will be held liable for false statements (incomplete or misleading). This liability is often limited to a percentage of the sale price. Usually, a ‚de minimis‘ clause is also included, stipulating that the seller is only liable for damages above a certain threshold. It is advisable to always establish a clear procedure and deadlines so that the parties know exactly where they stand. For tax and social debts, it is essential to explicitly include the statutory limitation periods.

Payment modalities
In addition to determining the purchase price for the target company, it is important for the parties to agree on the concrete payment modalities. For example, parties may agree that the purchase price should be paid in full at closing, or that part of the payment will be deferred or blocked. In many cases, parties will agree on a vendor loan, earn-out or a deposit into an escrow account.

A vendor loan is a mechanism by which payment of part of the purchase price is deferred. In addition to giving confidence to the bank, a vendor loan effectively serves as security for representations and warranties from the seller.

If the future results of the target are uncertain and the expectations between the buyer and the seller are divergent, the parties can opt for an earn-out arrangement, which partly defers the purchase price and also makes it dependent on the company’s future performance.

Finally, as security for the seller’s guarantees or for a later recalculation of the purchase price based on the closing accounts method, parties can also opt to deposit part of the purchase price in a special account that is blocked for a certain period of time (escrow account). Here, it is important to clearly formulate the conditions under which the blocked amount may be released.

Signing' and 'closing'

After negotiations are completed, the purchase agreement is signed (signing). There is often a time period between the signing of the purchase agreement and the actual transfer of the target (the closing). To protect you in this intervening period, it is useful to lay down obligations for the seller, such as continuing to run the business and obtaining approval for important decisions.

The closing takes place once all suspensive conditions are fulfilled (e.g. obtaining necessary permits) and the purchase price is paid. Ownership is officially transferred and registered in the shareholders‘ register. A share deal in Belgium does not have any specific form requirements and therefore does not require going to a notary.

An acquisition agreement may contain post-closing commitments. An example is the earn-out clause, where part of the acquisition price depends on the future performance of the company over a certain period of time after the transfer of the shares, or liability clauses if certain statements are subsequently found to be incorrect. In addition, director changes may need to be made after the acquisition, or you may wish to harmonise agreements, remuneration structures or other matters within the group. We can assist you with this as well.

During the acquisition process of a Belgian company, our international clients can enjoy the support of a team of lawyers specialised in various areas of law, such as corporate, commercial, employment and tax law. We ensure clarity on the legal, tax and financial implications of the planned transaction by performing a thorough due diligence and support you in drafting contracts such as NDAs (non-disclosure agreements), acquisition agreements and earn-out clauses.

CONTACT

Do you have any questions?

If you have any questions about mergers and acquisitions (M&A) in Belgium, please do not hesitate to contact our M&A team led by Sofie Jacobs. She can be reached by e-mail at s.jacobs@euregio.law or by telephone at +32 11 29 47 01.

Contacts Sofie Jacobs
Linkedin
Quick links
Expertise
Contact details