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Supporting Global Growth: A Successful UK Acquisition for an Overseas Manufacturer

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At IMD Corporate, we pride ourselves on facilitating complex transactions that support the strategic growth of our clients. One such notable transaction was our recent representation of an overseas manufacturer in their first UK investment. This transaction involved the partial acquisition of a UK distributor, a deal valued at over £8million. This case not only highlights our expertise in cross-jurisdictional acquisitions but also underscores the importance of meticulous planning, commercial awareness, and the ability to navigate complex legal frameworks.
Context of the Transaction
Our client, an established manufacturer with subsidiaries across Europe, had maintained a long-standing commercial relationship with the UK distributor prior to the acquisition. This relationship formed a strong foundation for their decision to invest in a minority share of the distributor, diversifying their investment portfolio and securing a strategic foothold in the UK market. Despite acquiring a minority share, our client gained significant management rights and an option to take over the entirety of the UK business in the future, ensuring their long-term interests were safeguarded.
Key Challenges and Solutions
The transaction was marked by several complexities that required a tailored and strategic approach. Below, we outline the primary challenges encountered and the solutions our team implemented to ensure the success of this deal.
1. Restructuring the Target Business
The UK distributor consisted of multiple companies, necessitating a significant restructuring prior to the acquisition. This involved setting up holding and management companies as well as various trusts. The restructuring process added layers of complexity to the transaction, particularly in relation to the legal documentation.
- Solution: Our team meticulously negotiated the necessary agreements, including guarantees and indemnities to address the risks arising from the restructuring. This ensured our client was adequately protected while facilitating a smooth transaction process.
2. Managing Split Exchange and Completion
Given the intricacies of the transaction, the exchange and completion phases were split. This posed the challenge of ensuring the business could continue its operations seamlessly during the interim period, while also preventing any material changes or adverse effects on its value.
- Solution: We included robust provisions in the Share Purchase Agreement to address potential leakage and safeguard the business’s value. These provisions were carefully negotiated to ensure the business remained stable and operational while protecting our client’s interests.
3. Planning for Future Acquisition
As part of our client’s long-term strategy, the acquisition included provisions for a potential future takeover of the entire UK distributor. This required careful negotiation of management rights and share-related protections.
- Solution: We worked closely with the management team to grant our client appropriate management rights and secure pre-emption and drag-along rights. These measures not only safeguarded our client’s position but also ensured a clear pathway for the future acquisition, with agreed pricing mechanisms and protections against potential sales to our client’s competitors.
4. Addressing Issues Identified in Due Diligence
Our comprehensive legal due diligence uncovered several issues that needed to be addressed collaboratively by all parties. These included operational, regulatory, and structural concerns that could have posed risks to the transaction.
- Solution: By maintaining a commercial focus, our team facilitated discussions between the parties to develop practical solutions for the identified issues. This cooperative approach ensured the transaction proceeded without delays or impediments, while protecting our client’s investment.
5. Navigating Cross-Jurisdictional Challenges
The cross-jurisdictional nature of the transaction added complexity, particularly in aligning the legal requirements of multiple jurisdictions with English law.
- Solution: Leveraging our extensive experience in international transactions, we guided our client through the nuances of English law, ensuring compliance while addressing the unique aspects of the cross-border deal. Our expertise enabled us to streamline the process and minimise potential risks.
6. Facilitating a Seamless Transition
In addition to securing the transactional framework, a seamless transition for operational management was critical. Ensuring business continuity during the interim period and preparing for long-term integration were key priorities.
- Solution: Our team worked with both parties to develop a transition plan that incorporated both immediate operational needs and long-term strategies. This included setting up joint management committees, streamlining decision-making processes, and ensuring communication channels were robust and effective.
7. Establishing Trust and Collaboration Among Parties
Complex transactions of this nature often hinge on the ability of parties to maintain trust and a collaborative spirit. Negotiations were extensive, and it was essential to align both legal and commercial priorities.
- Solution: By fostering open communication and emphasising shared goals, we helped bridge gaps between the parties. Regular updates and joint problem-solving sessions ensured that both sides were aligned throughout the process, reducing potential conflicts and delays.
The Outcome
Thanks to the collaborative efforts of all parties and the strategic guidance provided by our team, the transaction was successfully completed. The client’s acquisition of a minority stake, coupled with management rights and a clear pathway to full ownership, positioned them for long-term success in the UK market. This deal exemplifies how a well-structured and expertly executed transaction can achieve both immediate and strategic objectives.
This transaction not only secured our client’s foothold in a key market but also set the stage for future growth. The strategic approach to governance and operational integration ensured that both parties could continue to thrive and pursue mutual benefits.
Leadership and Collaboration
The deal was led by Olexandr Kyrychenko, the Head of Corporate, with support from his team and other business service departments when conducting due diligence. Their collective expertise and dedication ensured the transaction’s success, reaffirming our commitment to delivering exceptional results for our clients.
For more insights into our work on acquisitions and cross-border transactions, or to discuss how we can support your business’s growth, please get in touch with our team.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.