Key Considerations For UK Buyers Acquiring US Targets

This is the first in a series of articles focusing on cross-border M&A, written in collaboration by Dentons lawyers in the US and UK.

Cross-border private M&A in the mid-market between the UK and the US is common, but UK buyers, particularly those acquiring a US target for the first time, should be aware of meaningful differences in deal practice, regulatory requirements, and legal frameworks. UK buyers are likely to find the environment far more buyer-friendly in the US. Below is a concise overview of the key areas where US and UK practice diverge or where cross-border issues demand special attention.

Due Diligence Expectations

US due diligence is typically broader and more granular than what UK buyers may be accustomed to. Expect detailed review of all material contracts (including change-of-control provisions), employment classifications, benefits, tax compliance at federal, state, and local levels, litigation and regulatory investigations, IP ownership and assignments, privacy and cybersecurity programs, permits, sanctions and export controls, environmental liabilities, insurance, real estate, and financing arrangements. The overall scope of diligence is broadly similar to UK practice, and the depth reflects the US litigation environment and the role diligence plays in negotiating and supporting representations and warranties. UK buyers should nonetheless focus on the areas of genuine divergence, including deal conditionality, financing conditions precedent, and material adverse change (“MAC”) clauses, which are rarely seen in UK transactions; US tax structuring considerations, such as the use of blocker entities and the prevalence of Delaware incorporations; and the CFIUS and HSR regulatory regimes, both of which are of particular relevance to a UK buyer acquiring a US target.

Tax Structuring Considerations

In practice, these tax structuring considerations have several implications for UK buyers. A blocker is typically a US C-corporation (or other taxable entity) interposed between the UK buyer and the US target or investment, insulating the UK investor from direct US tax filing obligations and from having US-source income (including effectively connected income and FIRPTA (Foreign Investment in Real Property Tax Act)  gain on US real property interests) taxed or reported directly at the investor level; the blocker itself is subject to US corporate-level tax and repatriates proceeds to the UK buyer, typically by way of dividends, and blocker structures are common in fund- and private-equity-style acquisitions and in deals involving tax-exempt or non-US co-investors.

Delaware Incorporations

Separately, a large proportion of US targets, particularly private-equity- and venture-backed companies, are incorporated in Delaware because of its well-developed corporate statute (the Delaware General Corporation Law), its specialized Court of Chancery, and the resulting predictability of corporate law outcomes; UK buyers should expect the target’s certificate of incorporation, merger mechanics (including long-form mergers under DGCL Section 251 and short-form parent-subsidiary mergers under DGCL Section 253), and appraisal rights under DGCL Section 262 to be governed by Delaware law regardless of where the target’s business operations are actually located, and should factor this into transaction structuring and closing mechanics.

Risk Allocation

The overall approach to risk allocation in US and UK private-target deals is broadly similar, with both relying on negotiated representations and warranties as the primary post-closing risk-allocation mechanism. The key differences lie in the details: US warranties are typically repeated, or “brought down,” as a condition to closing, which is not standard UK practice; escrow and indemnification arrangements are used more heavily in the US; material adverse change clauses and other bring-down closing conditions are far less common in UK deals; and “sandbagging”/buyer-knowledge rules, which govern whether a buyer can claim for a breach it knew about pre-closing, differ materially between the two jurisdictions and are an important point of divergence for UK buyers to understand. Expect specific indemnities for known issues, indemnity baskets (deductible or tipping), caps (often a percentage of enterprise value), and negotiated survival periods.

Escrows and holdbacks are common, particularly where representation and warranty insurance (“RWI”) does not fully bridge the gap. As in the UK, RWI is now market-standard on US mid-market and PE deals. UK buyers should note that US RWI policies may have different exclusions and retention structures than those familiar in the UK market. As in UK RWI practice, the underwriting process often shapes the scope and specificity of the diligence exercise.

Purchase Price Mechanics and Working Capital

While UK private deals increasingly use (seller-friendly) locked-box mechanisms with limited leakage protections which favor price certainty over accuracy, US practice continues to favor completion accounts with post-closing true-ups. Key features include:

• Working capital adjustments measured against an agreed target or peg, with detailed definitions of net working capital and applicable accounting principles.
• Closing debt and cash adjustments (often with a “cash-free, debt-free” baseline).
• Earn-out provisions tied to post-closing financial or operational milestones, which require careful drafting around accounting methodologies, business conduct obligations, and dispute resolution.

UK buyers should invest time in understanding the mechanics of the working capital true-up process and negotiating clear definitions of included and excluded line items.

Employment

Unlike the UK, many US employment issues are governed primarily at state level rather than federally. Buyers should therefore understand where the target's workforce is located before assessing legal risk.US employment law differs fundamentally from the UK regime:

• At-will employment is the default; most employees receive offer letters rather than detailed employment contracts.
• Exempt vs. non-exempt classification under the Fair Labor Standards Act (and state equivalents) creates wage-and-hour risk—a frequent source of class-action claims.
• Independent contractor misclassification is a major enforcement area at both federal and state levels.
• Restrictive covenants (non-competes, non-solicits) vary dramatically in enforceability state by state; several states (including California) ban or severely limit non-competes.
• The WARN Act and state “mini-WARN” statutes impose notice and liability obligations for mass layoffs or plant closings.
• Benefits due diligence covers 401(k) plans, health and welfare plans, equity and incentive plans, and potential successor liability for ERISA violations.
• Immigration and work authorization issues require review, particularly for key personnel on employer-sponsored visas.

Tax

The US tax landscape is substantially more complex and multilayered than the UK’s:

• Federal, state, and local income taxes apply, each with distinct rules, rates, and filing obligations.
• Entity classification (C-corp, S-corp, LLC, partnership) drives both transaction structuring and ongoing tax treatment.
• Sales and use tax, payroll taxes, transfer taxes, and withholding obligations vary by state and locality.
• Acquisition structuring often involves US “blocker” entities or newly formed acquisition vehicles to optimize withholding, repatriation, and treaty benefits.
• FIRPTA may impose US withholding on dispositions of US real property interests.
• Tax-free rollover, equity contribution, and 338(h)(10) or Section 336(e) elections require careful coordination between US and UK tax advisors.

Regulatory

UK buyers must navigate a patchwork of US regulatory approvals:

• Hart-Scott-Rodino (HSR) Act: Pre-merger antitrust filings are required where applicable thresholds are met. Filing fees and timing should be factored into the deal timeline.
• Sector-specific approvals may include FCC, FERC, state public utility commissions, healthcare licensure, financial services regulators (OCC, state banking departments), and defense/government contracting authorities.
• Export controls and sanctions: ITAR, EAR, and OFAC compliance is critical, particularly where the target handles controlled technology or has international supply chains.
• FCPA/anti-bribery: US anti-corruption laws have broad extraterritorial reach.
• CFIUS (Committee on Foreign Investment in the United States) is a critical consideration for any foreign acquirer of a US business; given its importance to UK buyers, we will address CFIUS, together with other related and similar foreign investment screening and national security review regimes, in the next article in this series.

Intellectual Property

US IP diligence requires attention to:

• Chain of title: Confirm that all employee and contractor inventions have been properly assigned to the target entity (US law does not automatically vest employer ownership absent written assignment).
• Open-source software: Review for copyleft and permissive license compliance, particularly in SaaS and technology businesses.
• Inbound and outbound license agreements, including territorial scope and change-of-control provisions.
• Data and AI-related IP rights, including ownership of training data and model outputs.
• Government-funded IP (Bayh-Dole Act) may impose march-in rights or US manufacturing requirements.
• UCC liens and security interests encumbering IP assets.

Data Privacy and Cybersecurity

Unlike the UK’s GDPR-derived regime, the US has no single comprehensive federal privacy statute. Instead, privacy regulation is sectoral and increasingly state-driven:

• California (CCPA/CPRA) and a growing number of states impose consumer privacy obligations with private rights of action or significant regulatory penalties.
• Sector-specific federal statutes (HIPAA for health data, GLBA for financial data, COPPA for children’s data, BIPA-style biometric laws at the state level) layer additional requirements.
• Breach notification obligations vary state by state, with strict timelines and reporting requirements.
• Vendor data processing agreements may not mirror the DPA structures familiar to UK counsel.
• Cross-border data transfer mechanisms require careful structuring post-acquisition, particularly where the target processes EU/UK personal data and US privacy frameworks apply.

Litigation

The US litigation environment presents risks that are qualitatively different from the UK:

• Class actions and mass torts can create outsized exposure, particularly in employment, consumer, securities, and product liability contexts.
• Regulatory investigations by federal agencies (DOJ, SEC, FTC, state AGs) should be diligenced carefully, including non-public subpoenas and CIDs.
• Discovery exposure in US litigation is substantially broader than in the UK (including e-discovery obligations), and this factor should inform data retention and document hold practices.
• Insurance coverage mapping (D&O, E&O, CGL, product liability) is critical to understanding residual exposure.
• Settlement obligations, consent decrees, and ongoing compliance monitors should be reviewed for change-of-control implications.

Other Diligence Workstreams

UK buyers should also account for the following, each of which may present cross-border nuances:

• Environmental: CERCLA successor liability, Phase I/II assessments, state cleanup obligations.
• Real estate: Title, survey, zoning, lease assignments, and landlord consent requirements.
• Insurance: Adequacy of coverage, occurrence vs. claims-made policies, and tail coverage for pre-closing liabilities.
• Debt and financing: Change-of-control triggers, consent requirements under existing credit facilities, and intercreditor issues.
• Government contracts: Novation requirements, organizational conflicts of interest, and foreign ownership restrictions (FOCI).
• Related-party transactions and intercompany arrangements requiring unwind or arm’s-length restructuring.
• Capitalization and equity: Authorized vs. issued shares, option pools, phantom equity, and anti-dilution protections.
• State-level corporate filings, foreign qualifications, and good-standing requirements across all jurisdictions of operation.

Conclusion

For UK buyers entering the US market for the first time, the key takeaway is that US deal practice is more granular, more litigious in its assumptions, and more decentralized across state and federal regimes than the UK framework. Engaging experienced US counsel early (particularly on CFIUS, tax structuring, employment, and RWI) is essential to managing both timeline and risk. A well-scoped diligence exercise and clear allocation of cross-border responsibilities between UK and US advisors will set the foundation for a successful transaction.

Although UK and US M&A share many common-law foundations, differences in deal mechanics, regulatory regimes, employment law, taxation, and post-closing risk allocation require careful planning. Early coordination between UK and US legal, tax, financial, and regulatory advisors allows buyers to identify issues before they affect valuation, timing, or execution, and materially increases the likelihood of a successful transaction.

Originally published 3 August 2026

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