‍Speakers: Johanna Hamrefält & Amelia Rihs

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What was the lecture about?

Johanna Hamrefält and Amelia Rihs presented the different phases of the M&A process, from the moment an engagement comes in until the transaction is completed. The talk highlighted the differences between the respective starting points of the buy side and the sell side. The process begins with the preparation of a request list – which party initiates it depends on the structure of the transaction – after which its content is negotiated. A virtual data room is then set up, into which relevant documents are uploaded in accordance with the request list. Once the data room has been populated, the buy side begins its review and prepares a due diligence report. Based on the outcome of the report, the parties decide whether the transaction is to proceed. If they agree, a Q&A phase begins, after which a list of warranties is drawn up and negotiated. Finally, a share purchase agreement (SPA) is drafted and negotiated, followed by signing and – provided that all conditions precedent are fulfilled – closing.

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What did I learn?

The overall structure of the process was already familiar to me, which in itself was a valuable confirmation. Of particular interest, however, was the speakers' account of how materiality thresholds in due diligence reports vary between companies. They described a threshold of SEK 1 million, below which identified risks are not included in the report, as common, but said that some companies apply thresholds of up to SEK 5 million or, exceptionally, SEK 20 million. This variation illustrates that risk assessment in a DD process is not standardised but depends to a large extent on the size of the transaction, the parties' risk appetite and the commercial context. I had previously assumed that the review should be as thorough as possible, but the lecture highlighted how thoroughness in the work translates directly into higher cost for the client. A well-balanced materiality threshold thus appears highly appropriate to ensure that the work put in results in real value.

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One aspect the speakers did not address explicitly was the importance of knowing what you are looking for. On the basis of the request list, the reviewer is expected to be able to identify which documents can answer each question, judge when sufficient information has been obtained and when it is lacking, locate where the information may be found and determine what may be being withheld. At its core, this is about maintaining a critical judgement in relation to the other side's disclosure. In my view, such an ability can only be developed through a genuine understanding of the industry in question and the specific counterparty's business – which is crucial for being able to give the client qualified advice.

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Another aspect is the interpersonal dimension of transaction work. As an adviser – whether you represent the buy side or the sell side – you need to be able to handle the legal issues that arise on an ongoing basis, put pressure on the counterparty in the negotiation and at the same time steer your own client towards efficient delivery. This requires a negotiating ability grounded in real knowledge of the legal field in which you are arguing.

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Finally, the speakers touched on IP issues in a transactional context, which prompted a reflection on my part. Beyond the assessment of commercial IP agreements, the question arises of how you as a lawyer can meaningfully assess, for example, the strength of patents or the actual value of software. My view is that this requires a broader technical understanding – being able to review the target company's IT infrastructure, version control systems and security levels – in order to identify latent risks that are not apparent from the purely legal documentation but may have a material impact on the valuation of the transaction.

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What am I taking with me into my studies?

The talk strengthened my understanding of how central it is to master not only the legal but also the commercial and process-related aspects of transaction work. The insight that materiality thresholds are negotiable and context-dependent underlines the importance, as a lawyer, of being able to tailor one's advice to the individual client's circumstances rather than mechanically applying a given template. It is valuable to have it confirmed once again that the transaction lawyer's very strongest tool is understanding the commercial aspects in order to deliver the best advice.