The practice of acquiring a company is becoming increasingly popular in the Philippines. One of the most important things to determine in an acquisition is the structure of the transaction. This may be dictated by investment regulations. However, whether an asset or share purchase transaction structure is used will greatly affect how the IPR involved will be affected.
It is very important to carry out a due diligence check before following through on a merger or acquisition. The majority of enterprises have some form of IPRs and how integral those IPRs are to the business under acquisition is very important to know. An IPR-specific due diligence can be very useful.
Registered IPRs, such as trademarks and patents, can be simply checked with the relevant office. Not yet registered IPRs can prove difficult. In some cases they may mean that an in depth investigation of the business history, including employment contracts, confidentiality agreements and other documents that can determine the security of an IPR must be conducted. When acquiring a company that has licensed its IPRs from another company, it cannot be stressed enough that one must first review these license agreements to guarantee that the licensing contracts are in fact transferable.
Certainly. Some companies may have certain irregularities somewhere in the course of their business. For example, the director of a company may deliberately fail to file for registration of title to a property in order to save costs. It is imperative that a foreign investor resolves any irregularities there may be before entering into the merger and acquisition transaction.
Therefore, conducting a legal due diligence exercise is often just as important as conducting a financial due diligence to determine the viability of the target company in a merger and acquisition deal.