Consideration Considerations in Acquisition Transactions in the Privatisation of Indebank and Malawi Savings Limited

Consideration is the sum paid by an acquirer in exchange for shareholding in an investee and is a product of offer and acceptance principle which reflects the wishes of the buyer and seller. The exact number of shares to be purchased is supposed to be unequivocal and what must be paid should be clearly spelt out by the disinvesting party. The results of this study have however shown that the bidding process adopted by Public Private Partnership Commission had some weaknesses as it did not specify the exact shareholding percentage to be acquired by the bidder and the reserved price for the shares so that what acquirers finally purchased were materially different from what was stipulated in the bid documents. This was further exacerbated by failure of acquirers to demonstrate that they had recapitalised the investees to comply with Basel II Requirements since the acquirees were subsequently absorbed into the acquirers and ceased to exist contrary to the bidding conditions that the privatised entities would continue to operate as standalone entities. Recapitalisation obligation was supposed to result in recognition of liability in the books of acquirers because of deferred consideration but this was not done. Worse still, the actual proceeds from the privatisation of Indebank and Malawi Savings Bank were grossly misstated and whereabouts not known