Issue
The investor planned to buy a controlling stake at the seller's asking price, without information on tax obligations or ongoing contracts.
What HDS did
Reviewed corporate, land, labor, tax and key contract records; prepared a risk report ranked by severity; proposed warranty clauses and a mechanism to retain part of the price.
Result
Unpaid tax liabilities and a loosely drafted land lease were found; the investor renegotiated the price and added protective clauses.
Background
An investor planned to buy 60% of the shares of a packaging manufacturer at the seller's price. The seller mainly provided financial statements; the investor did not know about the company's tax liabilities, land status or ongoing contracts.
How HDS handled it
The Managing Lawyer took charge personally and, with the corporate and investment team, reviewed 5 groups of issues: corporate legal status, land and factory premises, labor, tax and key contracts. Each risk was ranked by severity and its financial impact estimated for the investor to use in negotiations.
Result
HDS found tax debt that had not been fully recorded and a land lease that had not been properly registered for changes. The investor negotiated a lower purchase price, added representations and warranties and a mechanism to retain part of the price until the seller completed remediation. The deal closed after 3 weeks of due diligence and 2 rounds of negotiation.
