Our final blog in our eight-part merger and acquisition [M+A] series is finally here. If you haven’t already been following along, we’ve unpacked each step of the M+A process and have collated all 8 blogs in our ultimate guide to mergers and acquisitions for your reading pleasure!

Our final blog wraps up the series and details considerations to bear in mind after completion of the deal.



As a buyer, it is important post-completion to be aware of the behaviour of the seller and to ensure those behaviours are not in breach of the restraints.

When buying a business or shares in a company, setting up restraints helps protect the viability and value of the business moving forward. The buyer should be looking to limit the seller from starting or working for a competing business and also restrict the seller from soliciting clients, suppliers or key workers of the business.

There are generally two types of restraints: non-competition and non-solicitation.

non-competition clause

  • Prohibits the seller from being engaged as or acting as an employee, contractor, consultant, director, or agent of a competing business or from starting a competing business [broadly speaking, a business that provides services that are the same or similar to the restrained business].
  • In the sale agreement, restraints will usually be defined by reference to a restraint area and a restraint period. For example, the seller is restrained from competing with the business for a period of 3 years from completion within an area of 50km from the premises of the business.

non-solicitation clause

  • Prohibits the seller [and any key employees] from soliciting, approaching, contacting, or poaching current key clients, suppliers, and employees from the business that they are selling.

When drafting any restraint provisions into the sale agreement the parties must consider what is reasonable depending upon the individual facts which are relevant to the business being sold, and the transaction as a whole.

As a buyer, purchasing a new business can be an exciting venture, however, the last thing you will want is for the seller to turn around and start competing with you directly.


what are representations and warranties?

When a seller is selling shares or assets in their business, as part of the sale agreement [depending on the drafting of the contract] they will provide certain warranties to the buyer to guarantee the value of the sale of either the shares or assets [that the seller has disclosed all relevant matters at the time of sale, for instance].

A detailed list of representations [an assertion of facts, true on the date the representation is made] and warranties [a promise of indemnity if the assertion is false] is commonly incorporated into a sale agreement. This serves to solidify in writing the representations which have been made by a seller and relied on by a buyer in entering into the sale transaction.

It is important to understand the interpretation of both terms, so if representations are used to entice the buyer to enter into the contract and if the seller breaches the contract, the buyer can usually terminate.

On the other hand, a warranty resides within the contract, and comes after the representations. If the seller breaches this part of the agreement following completion, the buyer can seek compensation for damages.


how does this apply after completion?

If the seller has breached any of the warranties provided after completion of the sale has occurred, it may allow the buyer to claim damages [or if discovered prior to completion, to terminate the agreement].

It is standard procedure for the buyer to also provide certain representations and warranties within the sale agreement, such as their ability to purchase the company’s shares or assets and fulfil any of their obligations under the agreement.

Representations and warranties are a critical part of a share or asset sale agreement. Unfortunately, there are situations where a buyer may later discover that some of the seller’s representations and warranties are untrue.

representations and warranties usually cover:

  • Any ongoing disputes or litigation,
  • The company’s tax status [if a share sale],
  • Statements regarding employee contributions and benefits,
  • Statement of fact regarding all financial statements of the business, or
  • Any specific representations or warranty that the purchaser would need to know.


Usually, the agreement for sale will include a cap on damages that the buyer can claim for a breach of a warranty. These caps may vary for the different matters the warranties deal with [i.e. a breach of a tax warranty may allow the buyer to be entitled to damages equal to 100% of the purchase price, while for general business warranties the damages may be capped at 50% of the purchase price].

The caps are usually open for negotiation between the parties prior to the parties signing the sale agreement.

It is also standard practice to specify a time limit on when the buyer can claim for a breach of warranty, as a seller does not want to give the buyer the power to be able to bring a claim decades after the sale has occurred.


accurate representation

It is of importance and interest to both the seller and buyer that the representations provided by the seller are not misleading or deceptive to avoid leading to damages being claimed by the buyer or the sale agreement being terminated. And for the warranties and monetary caps and time limits to be drafted appropriately within the agreement.


mergers and acquisitions

This marks the end of our blog series breaking down the process of an M+A transaction. If you have missed any of our previous blogs or would like to revisit other aspects of a merger and acquisition transaction, we break down all the steps in our full merger and acquisition blog series here.

Stay tuned for future content as we’re sure to tackle the topic from other angles, such as when it might be the right time to make an acquisition. You can check out the rest of our content on our blog page where we cover all things business, whether it be covering new regulations, breaking down other areas of law, or providing business insights to help you through your business journey.


we’re here to help!

If you are considering purchasing a business or shares in a company, give the team at businessDEPOT Legal a buzz on 1300BDEPOT or get in touch via legal@businessdepot.com.au to discuss how we can help you.


general advice disclaimer

The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.