Auf Wiedersehen, Pet

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Having looked at Trade Marks, we now turn our attention to  some of the potential implications of Brexit for the buyers and sellers of businesses.

Due diligence

 Due diligence is the process that a potential buyer conducts to assess the merits of an acquisition. As part of this exercise a potential buyer may want to carry out specific due diligence concerning the exposure of the target to Brexit risks both short and longer term. 

 There may be certain targets with more exposure such as those reliant on personnel or supplies of goods from the EU. Where risks are identified, the parties may need to mitigate such risks through the drafting of the terms in the share purchase agreement.    

 Potential for termination of material contracts 

 The buyer should review the terms of the contracts entered into by the target, to ensure that Brexit will not: 

-        Trigger a ‘material adverse change’ clause, allowing one or both parties to terminate a contract. 

-        Trigger a ‘force majeure’ clause, excusing a party from its contractual obligations on the occurrence of a disruptive event that is outside of a party’s control. 

-        Constitute a frustrating event, which is generally an event which could not have been foreseen by the parties at the time of entering the contract. 

If the buyer is aware of a material contract that could be terminated as a result of Brexit it may be worth discussing the issue with the seller and potentially speaking to the relevant third party to obtain some confirmation that they will not exercise their right to terminate the contract.  


If the target relies substantially on employees who are EU nationals, the buyer will need to examine the implications of changes to immigration on the workforce of such target. The buyer could consider drafting a pre-completion condition in the share purchase agreement that the seller must ensure that all its staff have the required immigration status to continue to work following Brexit. 

Warranty coverage 

Both parties should consider the potential impact of Brexit when drafting the warranties and completing the disclosure process to ensure that the drafting is flexible enough to encompass the effects of Brexit. For example, where a warranty refers to data protection compliance, the definition of data protection laws within the share purchase agreement should encompass any Brexit-related changes to data protection laws.

This isn’t a definitive list. There’s no one size fits all and nobody can say  with any confidence that they know what the implications of Brexit will be, so the key message for anyone buying or selling a business is that there is going to be an element of risk for some time. Few, if any, businesses, will be immune from the impact of Brexit.