Buying a Business in Australia: Legal Considerations

Buying a business is one of the most consequential decisions a corporate buyer can make. The right acquisition can accelerate growth, enter new markets, secure key talent and unlock synergies. The wrong acquisition can drain cash, distract management and create liabilities that take years to unwind. Getting the legal framework right is fundamental to making sure the deal does what it is supposed to do.

Step 1: Decide what you are actually buying

The first decision is structural: are you buying the company (a share sale) or just the business (an asset sale)?

Share sale. You acquire the entity that owns the business. Everything inside the company comes with it, including liabilities, contracts, employees, leases and litigation. Generally simpler from an operational continuity perspective, but risk-heavier because you inherit the past.

Asset sale. You buy specific assets and contracts, and assume only those liabilities you agree to take. Cleaner risk profile, but more administrative complexity (each material contract typically needs to be assigned, each employee re-employed, each lease consented to).

The choice affects price, risk, tax outcomes and execution complexity. Get it right at term sheet stage.

Step 2: Term sheet

A non-binding term sheet, heads of agreement or letter of intent crystallises the commercial deal before lawyers spend significant time on definitive documents. Key items to capture:

• The structure (share sale vs asset sale)
• Price, payment mechanism and any earn-out
• Conditions precedent (regulatory approvals, due diligence, financing)
• Exclusivity period
• Confidentiality
• Treatment of key employees

Most term sheets are non-binding except for a small number of provisions (typically exclusivity, confidentiality and costs). Make sure those binding parts are properly drafted.

Step 3: Due diligence

Due diligence is where deals are won, lost, or repriced. A proper legal due diligence process covers:

• Corporate structure and ownership
• Material contracts (customers, suppliers, distributors, partners)
• Employment arrangements
• Property and leases
• Intellectual property
• Regulatory licences and compliance
• Litigation and disputes
• Tax
• Insurance
• Data protection and privacy compliance

The buyer's due diligence findings inform pricing, the structure of representations and warranties, the scope of indemnities, and any conditions precedent.

Step 4: Negotiating the sale agreement

The Share Sale Agreement (SSA) or Asset Sale Agreement (ASA) is where the bargain is locked in. Key negotiating points include:

Representations and warranties. Statements by the seller about the condition of the business. Buyers want broad warranties; sellers want narrow ones with carve-outs.

Disclosures. A disclosure letter is a powerful tool for the seller, qualifying warranties against specific known issues. The interplay between warranties, disclosures and due diligence is delicate.

Indemnities. Indemnities cover specific identified risks (e.g. an ongoing tax dispute) or broader categories (e.g. environmental liabilities). The buyer wants extensive indemnities; the seller wants tight scope and caps.

Limitations on liability. Caps, baskets, time limits, and de minimis thresholds all shape the seller's overall risk exposure.

Conditions precedent. Regulatory approvals (FIRB, ACCC), board and shareholder approvals, financing conditions, key contract consents.

Completion mechanics. The order of events at completion, payment of consideration, delivery of share certificates or transfer documents, transition of contracts, employee transfers.

Step 5: Regulatory considerations

Depending on the deal, you may need:

• FIRB approval if the buyer is a foreign person or foreign government investor
• ACCC clearance for transactions that may substantially lessen competition
• Industry-specific approvals (e.g. in financial services, telecommunications, energy)
• Stamp duty registration and payment in relevant states

These take time and cost money. Plan for them at the term sheet stage, not after signing.

Step 6: Completion and integration

Completion is not the end. It is the start of integration. The legal workstream continues with:

• Notification of customers, suppliers and counterparties
• Employee transfers and harmonisation
• Integration of governance, policies and compliance
• Tax filings and stamp duty
• Post-completion adjustments (working capital, completion accounts)
• Earn-out monitoring (if applicable)

Common pitfalls

• Locking in the wrong deal structure at term sheet without proper analysis
• Underestimating the time required for due diligence
• Inadequate disclosure schedules, leading to warranty disputes after completion
• Ignoring change-of-control consents in material contracts
• Failing to plan for the FIRB or ACCC process early
• Treating earn-outs as a "nice to have" without robust accounting machinery to support them

How Luma Legal can help

We act for buyers across share and asset transactions, from due diligence through to negotiation, signing, completion and integration. Our role is to identify risk early, negotiate sharply, and deliver a clean transaction that achieves the commercial outcome you set out to achieve.