Mergers & Acquisitions — questions
Frequently asked questions about buying and selling a company
Selling or buying a private South African company involves a signed mandate, a defensible valuation, due diligence, and a sale agreement structured either as a sale of shares or a sale of business, with a Competition Commission filing where the transaction meets the notifiable merger thresholds.
What is the difference between a sale of shares and a sale of business?
A sale of shares transfers the company itself, including its liabilities. A sale of business transfers selected assets, contracts and employees, generally leaving historical liabilities with the seller unless the buyer agrees to assume them.
How is a private company valued?
Most valuations use an earnings multiple applied to maintainable earnings, checked against a discounted cash flow model, with an asset-based valuation used where the business holds significant tangible assets or is being wound down.
Do all company sales need Competition Commission approval?
No. Only transactions that meet the turnover or asset value thresholds under the Competition Act 89 of 1998 are notifiable mergers requiring clearance before implementation.
What does due diligence actually look at?
Financial records, material contracts, employment arrangements, litigation, regulatory compliance, intellectual property ownership and the company's statutory filing history are the areas most commonly reviewed.
What is an earn-out and when is it used?
An earn-out ties part of the purchase price to the business achieving agreed performance after closing. It is used when the buyer and seller cannot agree fully on value at signature, often because of growth uncertainty.
What is escrow used for in a company sale?
Escrow holds back a portion of the purchase price for an agreed period to cover potential warranty claims, giving the buyer recourse without needing to sue the seller for every dispute.
How long does a typical acquisition take from mandate to closing?
Timelines vary with complexity, but a private company sale commonly takes three to six months from mandate to closing, longer where a Competition Commission filing is required.
What do warranties and indemnities actually protect?
Warranties are statements about the business that, if untrue, give the buyer a claim. Indemnities cover specific identified risks on a rand-for-rand basis. Together they allocate risk that due diligence could not fully resolve.
Can a seller run a sale process without an information memorandum?
It is possible but not advisable. Serious buyers expect a structured memorandum, and without one a seller loses control of the narrative and often ends up answering the same questions repeatedly and inconsistently.
What does your fee structure look like for an acquisition mandate?
We charge a fixed mandate fee of R30,000 to run the process, plus a success fee agreed upfront as a percentage of the transaction value, so there is no surprise cost if the deal does not complete.
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Last reviewed: 2026-09-17
Written and reviewed by Dynamic Legal Services (Pty) Ltd, registration 2016/074955/07. Registered with the Department of Water and Sanitation, EAPASA applicant. Offices in Faerie Glen, Pretoria and Sandown, Sandton. Telephone 087 153 6207, support@dlegal.co.za. General information on South African regulatory practice, not advice on a specific matter — the first consultation is free.