Mergers and de-mergers: a step-by-step guide

22 Oct 2025

By Craig Darling, Partner, Corporate, Gilson Gray LLP 

Mergers and de-mergers are restructures that have the potential to bring economic value to a business if carried out correctly. However, if not done right, they can have the opposite effect where hidden liabilities, disputes, unexpected regulatory issues expose themselves.

It is, therefore, important to undertake the right due diligence and find the optimal structuring option before embarking upon such an adventure.

In this article, we explore the steps a business should take when going through a merger or de-merger to ensure a smooth transition.

Preliminary steps

It is important to start by contemplating and mapping why a merger or de-merger is the right route for a business, and to have a clear idea of what the desired outcome is. Early actions should include: outlining strategy and objectives, and identifying any red flags (financial, reputational and regulatory). A non-disclosure agreement (NDA) should be considered between the parties to ensure any information shared is kept confidential. A solicitor can also help prepare Head of Terms setting out the key principles agreed on in the deal.

Conducting Due Diligence

Several people from different disciplines are likely to be involved, for example solicitors, tax advisors, internal and external financial advisors, and human resources. A due diligence list should be prepared, outlining which documents should be seen to outline the full company overview. Relevant findings should be recorded in a due diligence report.

Some common elements to consider are:

• The corporate structure and governance. A solicitor should review documents such as Articles of Association, company registers (e.g. members, directors, secretaries, charges) and shareholders agreement.
• Contracts to understand what the business is involved in but also to review any clauses that may restrict or trigger events in a merger/de-merger.
• Litigation and insurance liabilities to understand the on-going and potential claims.
• Regulatory compliance such as any licenses, permits, but also potential regulators of the business e.g. FCA.
• Employment and pensions must be reviewed to grasp if there may be TUPE agreements to consider and any pension liabilities.
• Property owned or leased by the company should be checked on the Land Registry for the burdens and conditions that apply to the property/leases.
• Any tax liabilities, reliefs and treatment of consideration.
• Data protection and IT should be checked to ensure GDPR compliance, IT contracts, security and any liability.
• Intellectual property should be reviewed to understand ownership and the level of protection that exists.

Executing the merger/de-merger

The best structure for the entity needs to be carefully considered in a merger/de-merger to ensure it aligns with the objections set out from the start. The aim is to mitigate tax, liability, and regulatory constraints. A solicitor can also help negotiate protections using warranties and indemnities that will cover undisclosed risks.

Furthermore, your solicitor should help detail any exceptions in the disclosure letters, any condition precedents such as approval from a regulatory body, and ensure that it is agreed how completion will take place.  Your solicitor will also advise on the regulatory compliance that is necessary. You may need special resolutions for share capital changes and you will need to conduct statutory filings with Companies House, as well as arrange for the transfer of property. You may also need Competition and Markets Authority approval if market share thresholds apply.

Completing the Merger/De-merger

At completion, the agreement and any ancillary documents need executed, the consideration needs to be paid and share certificates delivered. The resolution and changes need to be filed with Companies House, as well as updating relevant stakeholders, regulators and employees. Your solicitor can help maintain a claims register and monitor warranty periods and indemnities for potential arising issues post-completion.

Final thoughts

The success of a merger and de-merger lies in meticulous planning, due diligence and execution. It is important to have an experienced solicitor to help. If you are currently contemplating a merger or de-merger, get in touch with Gilson Gray. We will be able to guide you through the steps, flag concerns, negotiate protections, and document the transaction to ensure you mitigate your risks.

To discuss any of the points raised further, please contact a member of our Corporate law team here.