An acquisition succeeds only when the buyer obtains the value it priced and the seller delivers a clean, enforceable exit. The legal process must connect structure, diligence, approvals, risk allocation, funding, closing mechanics and post-deal operations.
Do not transfer control, release funds or integrate operations until the required conditions and regulatory approvals are satisfied.
01
Define the transaction thesis
State what the buyer is acquiring and why: customers, licences, technology, land, talent, capacity, distribution or market entry. Identify the value drivers that must survive closing and the risks that would change price or stop the deal.
The seller should define its own objective: full exit, partial liquidity, retained upside, succession, capital injection or strategic combination. That determines whether it sells all shares, rolls over equity, retains assets or accepts deferred consideration.
What voting, veto, board or contractual rights move to the buyer.
Which entities, assets, contracts, employees and liabilities are included.
Headline price, debt, cash, working capital, earn-outs and leakage.
Approvals, financing, timetable, separation and integration capacity.
02
Choose between shares, assets and combination
In a share acquisition, the buyer acquires ownership of the target company. Its contracts, employees, assets and licences generally remain with the same legal person, but so do its historical liabilities and compliance record.
In an asset or business acquisition, the parties specify what transfers and what remains. This can ring-fence unwanted liabilities, but each land interest, contract, licence, employee, permit, debt, intellectual-property right and record may need separate treatment or consent.
Share purchaseSimpler continuity, deeper historical-risk exposure.
Asset purchaseSelected perimeter, more transfer mechanics and third-party consents.
SubscriptionNew capital enters the company rather than being paid solely to existing owners.
Merger or schemeStatutory structures may suit broader combinations and shareholder processes.
Model tax, licences, financing, minority rights and competition control before agreeing the form.
03
Use the term sheet to align the deal
A focused term sheet should identify the parties, target, structure, indicative price, adjustments, funding, conditions, timetable, exclusivity, confidentiality, access and costs. State clearly which provisions are binding.
Do not promise “cash-free, debt-free” or a working-capital adjustment without defining the accounting rules and illustrative calculation. Earn-outs require precise metrics, policies, information rights and protection against manipulation.
Exclusivity should have a fixed period and sensible buyer obligations. The seller should understand when it may terminate for delay, regulatory difficulty or a materially changed proposal.
04
Due diligence tests the price and contract
Legal diligence should be risk-led, not a document-counting exercise. Verify the target's ownership, authority, share capital, beneficial owners, licences, contracts, disputes, compliance, employment, land, IP, data, tax, debt and insurance.
- Identify facts that prevent the deal or require pre-closing correction.
- Quantify liabilities that justify a price adjustment, retention or indemnity.
- Find consents triggered by assignment or change of control.
- Test whether revenue depends on terminable or informal relationships.
- Confirm the target owns and can use its core assets and systems.
- Build a post-closing remediation and integration plan.
The seller should organise a reliable data room and disclose exceptions accurately. A rushed disclosure dump may not satisfy contractual disclosure standards.
05
Competition approval can control the timetable
The Competition Act treats an acquisition of direct or indirect control over a business, part of a business or assets as a merger in qualifying circumstances. CAK publishes current merger process guidance , thresholds and filing materials.
Analyse control, Kenyan nexus, turnover or assets and available exclusion or advisory routes before signing an unconditional deal. If notification is required, approval should be a condition precedent and the parties must avoid implementing control early.
Cross-border transactions may also engage the COMESA regional regime. In regulated sectors, obtain change-of-control or ownership approval from the relevant authority. Land, foreign investment, pensions, public procurement and contractual counterparties can add further consent layers.
06
Allocate risk in the transaction documents
The sale agreement should state what is sold, price mechanics, conditions, pre-closing conduct, warranties, disclosures, indemnities, limitations, termination rights and closing steps. Use schedules to make the mechanics executable.
Warranties elicit information and allocate unknown-risk exposure; indemnities target identified risks. Negotiate financial caps, time limits, thresholds, exclusions, mitigation, conduct of third-party claims and recovery under insurance or from another source.
Other documents may include disclosure letter, escrow agreement, tax deed, transitional-services agreement, IP assignment, new employment contracts, restrictive covenants, releases, loan settlement and property transfer instruments.
07
Tax and financing must fit the structure
Compare the tax consequences of share and asset transactions for seller, buyer and target. Consider capital gains, stamp duty, VAT, income tax, withholding, transfer pricing, deductibility and tax attributes. Use the law applicable to the transaction date.
The buyer's funding may combine equity, shareholder debt and acquisition facilities. Align lender conditions, security, funds flow and corporate-benefit approvals with closing. Financial assistance, distributions and target guarantees require careful company-law analysis.
Price adjustments should use accounting principles agreed in the contract, not an open-ended promise to agree after closing.
08
Separate signing from closing where necessary
Signing records the bargain; closing transfers ownership after conditions are met or waived. Maintain a conditions checklist covering competition and sector approvals, third-party consents, financing, restructuring, key contracts and regulatory filings.
Control the funds flow, documents and sequence through a closing agenda. Confirm originals, authorities, resignations and appointments, share or asset transfers, registers, passwords, keys, bank mandates and public filings. Release money only against the agreed evidence.
Where conditions remain outstanding, define the long-stop date, cooperation duties, interim operating covenants and consequences of failure. Do not allow interim covenants to give the buyer premature control.
09
Protect people and value after closing
A share sale normally leaves the employer entity unchanged, while an asset transfer may require new employment arrangements. Plan consultation, accrued rights, benefits, work permits, retention and any lawful redundancy process. Communicate only when the legal and operational facts are settled.
Integration should cover governance, banking, licences, tax, data, cybersecurity, contracts, brands, finance controls, reporting and culture. Keep the transaction clean team separate from operational integration until competition law permits.
Track warranties, indemnity deadlines, escrow releases, earn-out metrics and post-closing covenants. The deal team should hand over a clear obligations register rather than disappear after the announcement.
M&A CHECKLIST
From proposal to controlled closing
- Define the value thesis, perimeter and walk-away risks.
- Choose share, asset, subscription or statutory structure.
- Align price mechanics and binding term-sheet provisions.
- Run commercial, legal, financial and tax diligence.
- Map CAK, COMESA, sector and third-party approvals.
- Negotiate warranties, disclosures, indemnities and limits.
- Secure funding and an agreed funds flow.
- Control signing, conditions, interim conduct and closing.
- Plan employees, systems, licences and communications.
- Track post-closing claims and obligations.
THE DEAL IS A SEQUENCE
Buy the value—not an unmanaged history.
Good M&A execution connects diligence findings to price, protection, approvals and integration.FAQ
Frequently asked questions
Is buying shares the same as buying business assets?
No. A share buyer acquires the company with its history, assets and liabilities. An asset buyer selects specified assets and assumed liabilities, but transfers may require more consents, taxes, registrations and employee arrangements.
Must every acquisition be notified to the Competition Authority of Kenya?
No. Notification depends on whether the transaction creates a merger under the Competition Act and meets the applicable thresholds. Some transactions may qualify for exclusion or an advisory opinion. The analysis must occur before implementation.
Can parties close while merger approval is pending?
A notifiable transaction should not be implemented before the required approval. Conduct that transfers control early—including operational integration or decisive influence—can create gun-jumping risk.
What does legal due diligence cover?
It normally tests ownership, authority, corporate records, contracts, licences, disputes, employment, land, IP, data, tax, financing, compliance and liabilities, adjusted to the target and transaction.
What happens to employees after an acquisition?
In a share sale, the employer company ordinarily remains the same; an asset or business transfer may require new employment arrangements and consultation. Redundancy, benefits, accrued rights and work permits must be planned under applicable law.
OFFICIAL SOURCES
Read the law and merger guidance
- Competition Act — Kenya Law
- Companies Act — Kenya Law
- Mergers and acquisitions — CAK
- Merger forms and guidelines — CAK
- COMESA Competition and Consumer Commission
Legal-information notice: This guide provides general information, not legal, competition, tax, accounting or investment advice. Thresholds, approvals and transaction consequences depend on the parties, control, sector, financial data and deal date. Obtain transaction-specific Kenyan advice.