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Acquisition finance refers to the funding of company acquisitions, while leveraged finance involves the use of a significant amount of borrowed money to fund these acquisitions. In Australia, acquisition and leveraged finance are critical elements in the structure of mergers, acquisitions, and corporate takeovers. This area of law covers the negotiation and structuring of financial arrangements, taking security over assets, and compliance with various regulatory frameworks. Australian acquisition and leveraged finance deals are often complex, involving multiple parties such as banks, private equity sponsors, and other financial institutions.
Seeking legal advice in acquisition or leveraged finance transactions is highly recommended because of the complexity and high stakes involved. Common situations requiring legal help include:
A lawyer ensures that your interests are protected and that all transactions proceed smoothly within the legal framework.
Several key local laws and regulations govern acquisition and leveraged finance in Australia:
Transactions must also consider relevant tax laws and, in some cases, industry-specific restrictions. Due diligence, regulatory approvals, and careful documentation are essential for compliance.
Acquisition finance involves funding a business purchase, while leveraged finance specifically refers to using a high degree of borrowed money to fund such transactions, often increasing financial risk and potential return.
Yes, in Australia it is common to take security over the target company’s assets. However, this is subject to legal restrictions, due diligence, and financial assistance rules under the Corporations Act.
Financial assistance occurs when a target company helps fund its own acquisition, which is regulated under the Corporations Act. Legal advice is needed to ensure compliance and avoid penalties.
The PPSR is a national online database where security interests in personal property must be registered to ensure priority and enforceability in case of default. Proper registration is crucial in acquisition and leveraged finance deals.
Common steps include deal negotiation, due diligence, arranging finance, drafting and negotiating finance documents, obtaining regulatory approvals, and closing the transaction.
Foreign investors may need approval from the Foreign Investment Review Board (FIRB) before proceeding with certain acquisitions, depending on the nature and size of the investment.
Risks include increased financial leverage, potential difficulties in meeting loan obligations, regulatory breaches, and reputational damage if a transaction fails or is challenged.
While borrowing from overseas lenders is allowed, there may be tax implications like withholding tax and compliance with the Foreign Acquisitions and Takeovers Act, among others.
Intercreditor agreements establish the rights and priorities of different lenders, particularly between senior and mezzanine or subordinate financiers, to manage potential conflicts in case of default.
A lawyer will review legal, contractual, and regulatory issues, investigate title and security interests, and help identify risks or liabilities that may affect the acquisition or financing structure.
If you are considering an acquisition or leveraged finance transaction in Australia, or simply need advice on structuring financing, taking the following actions is recommended:
Early and focused legal advice can help protect your interests, manage risks, and ensure a successful acquisition or finance transaction in line with Australian laws.
