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Recurring IssuesRestructuring of the Target BusinessTarget businesses, particularly the ones establishedover generations, are rarely single purpose vehiclesand can include a wide range of unrelated and undocumentedactivities and trading relationshipsboth within the group and with counterparties.As a condition to closing, the target group shouldbe required to undergo a restructuring to formalizethird-party trading relationships, formalize ordischarge related-party agreements and intra-groupdebt, discharge local debt (as the buyer will oftenwant to refinance using international bank debtwithout prior security granted to local banks), divestnon-core assets and put any arrangement withany member of the selling shareholder group thatis to remain in place post-closing on fully documented,arm's length terms. More often than not,the pre-sale restructuring is as complex as the transactionitself, but if carried out effectively, it canreduce significantly the transaction risk associatedwith the acquisition.Selling ShareholdersCompanies in Africa very often include minorityshareholders unrelated to the controlling familygroup. These should be bought out by the principalcontrolling shareholder prior to sale at a fairand transparent price on arm's length terms, oreffectively bound into the sale process. Ideally,a buyer should seek a cohesive seller group withaligned interests as a counterparty to the purchaseagreement.Sale StructuresSellers often create an offshore holding companystructure pre-sale. It is essential to ensure the structuredoes not infringe local laws that restrict foreignownership (normally restricted to minerals, defence,media and the banking industries) or foreigninvestment controls, for example, requiring centralbank approval. This applies to both share ownershipand shareholder debt.RestrictionsLocal exchange controls and other regulations maylimit the ability of the buyer to repatriate profits orotherwise leverage the investment. A buyer shouldtherefore seek advice as to its intended method ofrevenue repatriation before acquisition. Some jurisdictionsalso require technology, licensing androyalty remittance arrangements to be approved bylocal regulatory authorities, and impose financialand practical constraints on inbound investors toensure local technology is not exploited to the detrimentof the local economy.Management and EmployeesMost jurisdictions impose quotas on expatriate employeesand many require social infrastructure as acondition of investment, in addition to national insuranceand social fund contributions.Effective Due Diligence and DisclosureThis area is critical. Even though buyers typicallyencounter undocumented business arrangements,significantly lower standards of corporate governanceand vague and inaccurate data disclosure51