Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.
Mergers and acquisitions (often shortened to “M&A”) can be an exciting growth move for a New Zealand business. You might be looking to buy a competitor, acquire a key supplier, sell your business to a bigger player, or merge with a partner so you can scale faster.
At the same time, M&A can feel like a lot: due diligence, pricing, staff questions, contract assignments, IP transfers, and making sure you don’t accidentally inherit liabilities you didn’t bargain for.
This guide is current and reflects the legal and commercial realities NZ businesses are dealing with right now (including the increased focus on privacy, digital assets, and “paperwork gaps” that can derail a deal). If you’re planning an acquisition, merger, or business sale, getting your legal foundations right early can save you serious time, cost, and stress later.
What Counts As A Merger Or Acquisition (And Why It Matters)
In simple terms, an acquisition is where one business buys another. A merger is where two businesses combine (sometimes under a new structure), usually because it benefits both sides.
However, “M&A” isn’t just one kind of transaction. The legal structure you choose changes:
- What you’re actually buying (shares vs assets)
- What liabilities you might inherit
- Which contracts need consent to transfer
- What happens to employees
- How tax and GST might apply (you should always confirm tax with an accountant)
Share Sale Vs Asset Sale (The Two Most Common Deal Structures)
Most SME transactions in NZ look like either a share sale or an asset sale:
- Share sale: you buy the shares in the company that runs the business. The company stays the same legal entity, just with new owners.
- Asset sale: you buy selected business assets (like stock, equipment, IP, customer lists, and goodwill) and usually take on only the liabilities you agree to take on.
Neither structure is “better” in every situation. The right option depends on your risk profile, what you’re buying, how the business is set up, and what the seller is willing to agree to.
If you’re in the early stages, it can help to get advice before you lock in a structure in writing (including in term sheets or emails). Once parties start relying on “agreed” terms, it’s harder to unwind expectations.
“Merger” Can Still Be A Purchase (In Practice)
Even when people say “we’re merging”, the deal often ends up being:
- one party acquiring shares in the other, or
- both parties rolling into a new holding company, or
- a partial sale plus a new joint ownership structure.
That’s why the documents matter. The commercial story might be “a merger”, but the legal reality needs to be written clearly so ownership, control, profit rights, and exit rights are all understood.
How To Prepare For An M&A Deal (Before You Sign Anything)
A smooth deal usually starts well before lawyers start drafting the main agreement. The best outcomes happen when both buyer and seller do a bit of upfront housekeeping.
1. Clarify Your Objectives (Growth, Exit, Or Risk Reduction)
Start with the basics. Are you trying to:
- expand into a new location or market segment?
- buy capability (like staff expertise, systems, or licences)?
- secure IP, brand, or a distribution channel?
- exit the business and move on?
- bring in a strategic partner while keeping some ownership?
Your objectives drive your “non-negotiables” (price, handover period, restraint of trade, what happens to staff, and whether the seller stays involved).
2. Get Your Company Records And Ownership Settings In Order
If you’re selling (or raising capital as part of a deal), buyers will want to see clear records. Common speed bumps include unclear shareholdings, missing resolutions, or informal arrangements between founders.
For many businesses, this is also the moment to formalise how decisions get made going forward with a Shareholders Agreement and, where appropriate, a Company Constitution.
Even if you’re not “selling today”, clean records can directly increase buyer confidence and reduce the number of conditions they insist on.
3. Think About Confidentiality Early
M&A discussions often require sharing sensitive information: financials, supplier pricing, customer lists, employee arrangements, and future plans.
Before you disclose anything significant, it’s usually smart to put a confidentiality document in place (and make sure it actually matches the deal scenario). A well-drafted Non-Disclosure Agreement can help set clear boundaries around use, storage, disclosure, and return/destruction of information.
4. Don’t Treat “Handshake Deals” Like They’re Risk-Free
We get it: early-stage conversations can feel informal. But buyers and sellers often start acting based on assumptions (“we’ve basically agreed”) long before the lawyers finalise the paperwork.
This can lead to problems like:
- staff being told too early
- customers being approached prematurely
- exclusive dealing assumptions (where one party stops looking for other options)
- disputes over what was “included in the price”
If you’re at the point where real commercial decisions are being made, it’s time to document the process properly.
Due Diligence In New Zealand: What Should You Check Before Buying?
Due diligence is the buyer’s opportunity to verify what they’re purchasing and identify risks before they commit. It’s not just box-ticking - it’s how you avoid buying problems you didn’t price in.
For sellers, a good due diligence process is also your chance to build trust and keep the deal moving.
Common Due Diligence Areas (Legal And Practical)
While every deal is different, due diligence often includes:
- Company structure and ownership: share register, director details, authority to sign, and whether there are any hidden interests.
- Key contracts: major customer contracts, supplier arrangements, leases, financing, distribution agreements, and service terms.
- Employment matters: employment agreements, contractor arrangements, wage compliance, policies, disputes, and leave records.
- Intellectual property (IP): trade marks, domain names, branding, software ownership, and whether IP is actually owned by the business.
- Regulatory compliance: licences, industry rules, council consents (where relevant), and health and safety systems.
- Privacy and data: what personal information is collected, where it’s stored, and whether processes align with the Privacy Act 2020.
- Litigation and disputes: threats, complaints, unpaid debts, claims, or ongoing investigations.
Why Contracts Are Often The Biggest Deal Risk
When you buy a business, you’re usually buying its relationships - and those relationships are defined by contracts.
Key questions include:
- Are the most important contracts actually signed and current?
- Do they allow assignment to a buyer, or do you need consent?
- Do they contain change-of-control clauses (especially in share sales)?
- Are there minimum terms, exclusivity, or penalty clauses that affect value?
A commercial lease is a classic example. If the lease can’t be assigned (or if landlord consent is delayed), completion can be pushed back or the deal can fall over. Where a lease is involved, you may need an Deed of Assignment of Lease as part of the transaction steps.
Employment Due Diligence: Don’t Leave It To The End
Employees can be the most valuable part of a business - and also the area that triggers the most stress if handled late.
As a buyer, you’ll want to understand:
- who the key people are and whether they’re likely to stay
- what employment terms apply (including any incentive arrangements)
- whether there are performance or disciplinary issues on foot
- whether there are compliance risks (like misclassified contractors)
If you’re hiring or inheriting staff post-deal, it’s worth ensuring your Employment Contract suite (and workplace policies) are consistent and up to date.
Key Legal Documents In An M&A Transaction
M&A documents aren’t just formalities - they’re what allocate risk, define what’s included, and set out what happens if something goes wrong.
Your document set will depend on the structure, size, and complexity of the deal, but here are some of the common building blocks.
Heads Of Agreement / Term Sheet
Early in a transaction, parties often sign a short document setting out key commercial terms (like price, structure, conditions, timeframes, and exclusivity).
This stage is important because it can create momentum - but it can also create confusion if it’s vague or unintentionally binding. If you’re using a term sheet, be clear about:
- which terms are binding and which are “subject to contract”
- exclusivity periods (and what happens if either party breaches)
- confidentiality and announcement controls
- conditions (finance, due diligence, consents, board approvals)
Business Sale Agreement Or Share Sale Agreement
This is the main contract for the transaction. It usually covers:
- What’s being sold: shares or assets, and exactly which assets/liabilities are included
- Purchase price and adjustments: working capital, stock valuation, debt, or earn-outs
- Conditions precedent: what must happen before completion (e.g. landlord consent, finance approval)
- Warranties and indemnities: promises about the business, and remedies if they’re wrong
- Restraints of trade: preventing the seller from competing (to the extent enforceable and reasonable)
- Completion steps: payments, handover, access to systems, transfer of records
For many business owners, this is the most financially significant contract they’ll ever sign. It’s worth getting it reviewed and tailored to the actual risk profile of the deal - generic clauses often miss the issues that matter in your industry.
Ancillary Documents (The Ones That Make The Deal Actually Work)
Depending on the transaction, you may also need:
- IP assignment or licence: so the buyer actually gets the brand, content, software, or know-how they paid for.
- Lease assignment documents: where premises are part of the business operations.
- Employment documents: new offers, variations, or contractor agreements post-completion.
- Deeds of accession: so new shareholders become bound by the shareholders agreement.
- Settlement or release deeds: particularly if there’s a dispute, or if founders are separating as part of the restructure.
If you’re buying a business with valuable customer data or an online platform, it’s also wise to check whether customer-facing legal documents (like terms and a Privacy Policy) are in place and align with how the business actually operates.
Common M&A Legal Issues That Catch NZ Businesses Off Guard
Most M&A disputes don’t start with bad intentions. They start with unclear expectations, rushed timetables, or missing paperwork.
Here are some of the issues we commonly see - and how you can reduce risk.
1. “We Thought That Was Included” (Scope Creep In Asset Sales)
Asset sales can be great for buyers because you can choose what you’re purchasing. But the trade-off is you need to define scope precisely.
For example:
- Is the website included?
- What about the domain name and social media accounts?
- Are supplier rebates included?
- Is WIP (work in progress) included, and how is it valued?
If it matters to the operation of the business, it should be clearly dealt with in the sale agreement and completion checklist.
2. Contract Consents And “Change Of Control” Clauses
Even if the buyer and seller agree, third parties can hold up a transaction.
Some contracts require consent to assign them (common in supplier, customer, and software contracts). In a share sale, the company remains the contracting party - but many agreements still have “change of control” clauses requiring notification or consent.
Plan early for consents so they don’t become a last-minute surprise.
3. Employee Communications And Transition Planning
Employees will have real questions about job security, management changes, and what happens next.
From a legal perspective, you want to manage:
- timing: when staff are informed and by whom
- continuity: what terms carry over and what changes post-sale
- confidentiality: keeping the process controlled until it’s appropriate to announce
A good transition plan reduces the chance of key staff leaving right when you need stability most.
4. Inherited Compliance Problems
Buying a business doesn’t just mean buying revenue - you might also be buying compliance gaps.
Some common examples include:
- privacy practices that don’t match the Privacy Act 2020
- employment arrangements that don’t meet minimum standards
- misleading advertising risks under the Fair Trading Act 1986
- refunds and product guarantees issues under the Consumer Guarantees Act 1993 (where applicable)
This is why warranties, indemnities, and clear disclosure schedules matter. If something is wrong, you want a contractual pathway to recover loss - not a vague “we didn’t know”.
5. Post-Completion Disputes About Handover And Support
Many transactions involve the seller staying on for a handover period, consulting, or transitional support.
If that’s part of the deal, document it properly: scope, hours, responsibilities, payment, and what happens if either party wants to end the arrangement early. This is one of those areas where a little clarity upfront prevents months of frustration later.
Key Takeaways
- M&A can be structured in different ways (especially share sales vs asset sales), and the structure you choose affects risk, contracts, and what liabilities you may inherit.
- Due diligence is where you identify deal risks early - key areas include contracts, employment arrangements, IP ownership, regulatory compliance, and privacy practices.
- The main sale agreement should clearly define what is being sold, how the price is calculated, what conditions must be satisfied, and what warranties/indemnities apply.
- Third-party consents (like landlord consent for a lease assignment or “change of control” clauses) can delay completion if you don’t plan for them early.
- Employee transition planning is both a legal and practical priority - clear communications and up-to-date employment documentation help avoid disruption.
- M&A documents aren’t “one size fits all”; tailoring is how you protect your business from day one and avoid costly disputes after completion.
If you’d like help buying, selling, or restructuring your business, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.