Structuring the Deal and the Group

4.1The perimeter: deciding exactly what is being bought

Before anyone argues about price, warranties or timetable, there is a question that has to be answered first, and answered precisely: what, exactly, is inside this deal? Deal teams call the answer the perimeter — the exact set of companies (and, in an asset deal, assets and liabilities) that will belong to the buyer after completion. It is not a statutory term; you will not find it defined in any Act. But it is on the whiteboard at the start of every transaction, and every workstream that follows is scoped by it.

In a share deal the perimeter is drawn by corporate ownership. As you saw in Chapter 3, buying the shares of a company means acquiring everything that sits beneath it. In Project Sunrise, Atlas buys the shares of exactly one company — Solaris Digital Assets Europe Limited — and the two subsidiaries come with it automatically, because the Target owns them. Schedule 1 of the SPA is the perimeter written down: Part A describes the Target, Part B lists the Subsidiaries, and the SPA bundles the three companies together as the “Group”.

But a schedule only lists what the seller chose to put in it. How does the buyer know there is nothing else — no forgotten dormant company, no overseas branch quietly registered years ago, no 20% stake in a joint venture with liabilities attached? By making the seller warrant it:

Read it slowly — it does two jobs. First, it confirms the chain of ownership: the Target owns the whole of each subsidiary, outright and unencumbered, so the perimeter holds together. Second — the quiet part — it confirms the perimeter is complete: there is nothing else hiding in the group. If a Lithuanian branch surfaces after completion, the buyer has a warranty claim rather than merely a nasty surprise.

4.2Pre-sale reorganisations: carve-outs and hive-downs

The perimeter the buyer wants is often not the group as it stands. The business being sold may share a company with businesses the seller is keeping, or drag along history the buyer will not touch. When that happens, the seller reorganises the group before completion so that the perimeter contains exactly what is being sold — no more, no less. Two shapes dominate.

A carve-out is extraction: before completion the seller moves out of the target group whatever it intends to keep, so that what remains inside the perimeter is only what is sold. What the seller keeps might be a subsidiary that belongs to a different division, a property, or a brand used group-wide. A hive-down is the mirror image: the business being sold is transferred down into a clean, newly incorporated subsidiary — a NewCo — and the buyer then buys the shares of NewCo. Hive-downs are the classic answer when a seller is disposing of a division that has never had its own corporate box. They are also the answer when a seller wants legacy liabilities to stay behind in the old company rather than travel with the business.

Neither comes free. A reorganisation is itself a transfer of business and assets, with all the frictions of an asset deal that Chapter 3 introduced: contracts do not move automatically, so counterparties may have to consent or the contracts be novated; landlords must approve the transfer of leases; employees may transfer automatically under TUPE in the UK (or local equivalents elsewhere), bringing information and consultation duties; and regulatory licences generally cannot be hived down at all, because an authorisation belongs to the authorised entity. Moving assets around a group can also trigger tax charges when the group is then broken up — the degrouping problem flagged in section 4.6. And if the extracted and retained businesses were operationally entangled, someone must keep the lights on across the new boundary. That is done under a transitional services agreement (TSA). A TSA is a contract under which the seller keeps providing services — IT, payroll, finance — to the sold business for a period after completion.

4.3Reading a group structure like a lawyer

One of the first documents into the data room is the group structure chart. Commercial people read it for reporting lines; you read it functionally. Most groups are built from three kinds of company: a holding company (“holdco”), which exists to own shares in other companies and rarely trades itself; an operating company (“opco”), which carries on the actual business and holds the customer contracts and any licences; and a service company, which employs staff or owns assets and charges the rest of the group for using them. For every box on the chart, ask three questions: what does it own, whom does it employ, and what permissions does it hold?

Run the Sunrise group through that filter and the chart comes alive. The regulatory licence sits in the Target itself: Solaris Digital Assets Europe Limited is the company authorised by the CBI as a crypto-asset service provider. That is why the change-of-control approval in clause 5 attaches to the Target. The client assets sit in the Irish custody subsidiary. And the technology sits in Poland: warranty paragraph 7.1 of Schedule 3 confirms that “the trading platform software known as ‘Helia’ is owned by Solaris Tech Services sp. z o.o.” Solaris Tech Services is the Polish service company that also employs the developers. A buyer cares deeply about that sentence. Because the Polish company is inside the perimeter, buying the Target means buying the engine as well as the car. If Helia were owned by some other Meridian company outside the perimeter, Atlas would be paying €42m for a business that does not own the platform it runs on. The day after completion, Atlas would find itself negotiating a licence for its own core technology from the seller it just paid.

The chart also has invisible lines on it: intra-group agreements. Money and services flow between the boxes, and any flow that crosses the perimeter must be found in due diligence and dealt with in the SPA. In Sunrise there is one: a management services agreement dated 2 May 2022 between the Seller and the Target, under which Meridian charges the Target €25,000 a month. At completion it goes: the Seller must deliver evidence of its termination, at no cost to the Group — Schedule 2, Part A, item (f). (The monthly charge itself is Permitted Leakage until then — a locked-box point that Chapter 9 will explain.)

A short discipline for every structure chart you are handed:

• Check the chart against Schedule 1 and against company registry searches — do all three agree?
• For each box: what does it own, whom does it employ, which authorisations does it hold?
• Where does the IP sit — and is that inside the perimeter?
• Which agreements and money flows cross the perimeter, and what does the SPA do with them at completion?
• Any dormant companies, branches, minority stakes or joint ventures — and are they meant to be there?

4.4Which entity does the buying?

Structuring is not only a seller-side sport. The buyer must decide which entity in its own group signs the SPA — and the answer says a lot about the kind of buyer it is.

The simple case is Sunrise. Atlas is a strategic buyer (a “trade buyer”) — an operating company buying a business in its own industry. It signs the SPA itself and pays cash from its own balance sheet, topped up by a syndicated loan raised for the acquisition. Whichever mix it uses, Atlas warrants in clause 8.6 that it will have immediately available funds at Completion. One company, one signature, no scaffolding.

Private-equity deals look different. The fund does not buy in its own name; instead it incorporates a chain of new companies — an acquisition stack — usually called Topco, Midco and Bidco, and the bottom one buys the target. Each layer exists for one plain reason.

Topco is where the equity sits. The fund subscribes for its shares. The target’s management team is usually offered the chance to roll over — to take part of their sale proceeds in Topco shares instead of cash. That way, the people running the business share in its future upside and are locked into its success.

Midco is an intermediate holding company whose job is to keep layers of funding apart. Different lenders and investors can sit at different levels of the stack with different rights; the lower down you sit, the closer you are to the business and its assets. One Midco is common; leveraged deals may have several.

Bidco signs the SPA and becomes the direct owner of the target. Critically, Bidco is also the borrower: the acquisition debt is pushed down to sit in Bidco, next to the business whose cash flows will service it. The lenders take security over Bidco’s assets — above all, over the target’s shares. If everything goes wrong, the lenders enforce against Bidco and the target; the fund’s other investments sit safely above the stack, out of reach.

One consequence matters to the seller: Bidco is a brand-new shell with no money of its own. A seller facing a Bidco will ask hard questions about certainty of funds — typically demanding an equity commitment letter from the fund and evidence of committed debt financing before signing.

The loan documents behind that committed financing are a discipline of their own — syndicates, agents, covenants and events of default, usually on the market's standard syndicated-lending architecture. They get the full treatment in our companion course, Finance Deals & Syndicated Lending. That course follows the same fictional deal, because Atlas borrows to fund the Sunrise purchase.

4.5Cross-border wrinkles: English contract, Irish company

New joiners sometimes pause at a basic feature of Sunrise: the SPA is governed by English law, yet the company being sold is Irish. There is nothing odd here at all. The governing law of a contract is chosen by the parties, and clause 17.1 picks the law of England and Wales. English law is a very common choice for cross-border European M&A even where the target sits elsewhere, because both sides’ lawyers know it, the case law is deep, and the courts are predictable. Meridian and Atlas are both English companies; choosing English law was the path of least resistance.

But the parties’ choice reaches only the contract. The Shares themselves are property created by Irish company law, and their transfer must satisfy Irish formalities regardless of what the SPA says: a duly executed share transfer form; the Target’s board approving the registration of the transfer (look at items (a) and (e) of Schedule 2, Part A — both are exactly this); the write-up of the register of members, which is when the buyer actually becomes the legal owner; and any local stamp duty on the transfer — which clause 16.2 allocates to the Buyer. Two legal systems, each doing its own job:

This split is why cross-border deals run with local counsel. English lead counsel drives the SPA and the negotiation. Irish counsel confirm title and transfer mechanics, handle completion formalities and filings, and advise on anything Irish law reserves to itself. Polish counsel may be asked to confirm the subsidiary’s ownership of the Helia IP and check its employment arrangements. As the junior, you will often be the person coordinating them — scope their questions early and precisely, because local-counsel fees grow in the dark.

One more piece of buyer-side flexibility belongs here. Groups change shape after completion — buyers reorganise, refinance, and lenders want collateral. So buyers want the benefit of the SPA (above all the warranty and indemnity rights) to be movable within their group and chargeable to their banks. Sellers do not want to face an unknown counterparty or a bigger claim than they signed up to, so they agree only within tight limits:

4.6Tax touchpoints — spot them, then pick up the phone

This is not a tax course, and structuring tax is emphatically specialist work. But three flags recur so often that every deal junior must recognise them on sight.

Stamp and transfer taxes. Many jurisdictions tax the transfer of shares. Which country’s tax applies follows the company and its shares — not the SPA’s governing law. The SPA’s job is allocation: in Sunrise, clause 16.2 puts documentary and transfer taxes on the Buyer, which is the usual position.

Degrouping. Transfers of assets between companies in the same group are often tax-neutral, on the implicit bargain that the assets are staying in the family. If the receiving company is then sold out of the group within a statutory period, that relief can be clawed back — a degrouping charge, landing inside the very company the buyer has just bought. This is the standing tax risk of every carve-out and hive-down, and it is why the tax team reads the reorganisation steps plan before anyone signs it.

Withholding tax. Cross-border payments inside a group — interest, royalties, dividends, service fees — can attract withholding tax: tax deducted at source in the paying country, sometimes reduced by double-tax treaties. Any structure where, say, a Polish company owns the platform that Irish companies use has cross-border flows worth a tax specialist’s glance.

4.7The listed-buyer overlay

Atlas is not just any buyer: it is a plc with shares traded on a public market. That drapes three extra disciplines over the whole transaction.

Announcements. The parties have pre-agreed the press announcement and committed to release it at signing — clause 12.3 — with no other public statements without consent. But look at the carve-out in clause 12.2: disclosure required “by the rules of any stock exchange on which a party’s securities are listed” is always permitted. That carve-out exists for Atlas. A listed company can be legally obliged to announce, whatever the SPA says, and no seller can contract that obligation away.

Shareholder approval and class tests. Public markets size an acquisition against the buyer itself. Under class tests, the listing rules compare the target with the listed buyer — its assets, its profits, the consideration against the buyer’s market capitalisation. The bigger the ratios, the heavier the obligations: detailed market notifications for significant deals, up to a full shareholder vote for company-transforming ones. A reverse takeover, where the target is bigger than the buyer, is one example. A required vote adds months and a genuine completion risk, so sellers probe it early. For Atlas, a €42m purchase is comfortably small — but “do the class tests bite?” is a day-one question on every listed-buyer deal, because the answer drives the timetable.

Inside information. Knowledge of an unannounced deal of any real size is likely to be inside information under the UK market abuse regime: precise, non-public and liable to move the buyer’s share price. So the deal team is kept deliberately small, insider lists are maintained, nobody trades in Atlas shares, and nobody so much as hints at the deal outside the tent. It is also why the transaction has a code name — the deal is “Project Sunrise” everywhere, down to the Data Room itself, so that a stray email subject line gives nothing away.

You can now read a group structure chart the way the deal team does: perimeter first, then what sits where, then what crosses the line. Test yourself below — then on to Chapter 5, where the seller gets the business ready for market.