Beruflich Dokumente
Kultur Dokumente
In 2010
Acquisitions: Three Types
• Asset Purchase
• Stock Purchase
• Merger
•
2
Asset Purchase
STOCKHOLD STOCKHOLDE
ERS RS
$
$
TARGET BUYER
ASSETS +
LIABILITI
ES
3
Asset Purchase
• Buyer acquires only assets and liabilities of
the company
• Buyer can negotiate which outstanding or
contingent liabilities to assume and not to
assume
• Buyer can select which of the seller’s assets
to acquire
•
•
4
Asset Purchase (cont’d)
• Buyers prefer to buy assets
• Sellers prefer to sell stock
• The tax disadvantages of an asset
deal to stockholders of the
seller lead to a stock or merger
transaction
• Asset purchases are most
common in the acquisition of
divisions of companies
5
Stock Purchase
STOCKHOLD STOCKHOLDE
ERS RS
ST $$ +
OC
K
ST
CK O
TARGET BUYER
6
Stock Purchase
9
Reverse Triangular Merger
STOCKHOLD STOCKHOLD
ERS ERS
$
$
MERGES INTO
TARGET TARGET BUYER
• TARGET BECOMES A WHOLLY OWNED SUB OF BUYER AND CHANGES NAME TO BUYER’S NAME
10
Forward Triangular Merger
STOCKHOLD STOCKHOLD
ERS ERS
ST
O
K C
$
$
MERGES INTO
TARGET BUYER Buyer
• BY LAW, “SURVIVING” CORPORATION SUCCEEDS TO ALL ASSETS, RIGHTS, LIABILITIES OF “DISAPPEARING” CORPORATION
• UNWILLING TARGET STOCKHOLDERS MAY “PERFECT” DISSENTERS RIGHTS
11
M&A Transaction Stages
• Stage 1: Through the letter of intent
• Stage 2: Through the definitive purchase
agreement
• Stage 3: To the closing
• Stage 4: After the closing
12
M&A Overview: Stage 1
LETTER OF INTENT DEFINITIVE AGREEMENT CLOSING
Stage 1 Stage 2 Stage 3
Find Target
Engage Ibanker
Financial Analysis
Preliminary Due
Diligence
Negotiate Basic
l ae D sse ni s u B
Terms
Target NDA
IBanker Engage-
ment Letter
Due Diligence List
st ne muc o D
Regulatory Strategy
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Stage 1: Through the Letter of
Intent
• Buyer and seller define respective goals in
transaction and find one another
• Non-disclosure agreement (NDA) is signed
• Investment banker is engaged
• Buyer undertakes due diligence investigation
of seller
• Terms of transaction are agreed to by signing
a letter of intent
•
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Stage 1: The Letter of Intent
• Describes the most important elements of a
transaction:
– type of transaction
– price and form of consideration, with a clear
understanding of business, tax and legal
ramifications of transaction
– payment terms and key contingencies (such as
buyer financing)
– Sets fundamental transaction structure and terms
15
Stage 1: Letter of Intent-Other
Considerations
• Parties will be unlikely to agree to the modification
or amendments to the letter of intent
• Courts have held that even non-binding letters of
intent create a binding obligation to negotiate in
good faith based on the terms set forth in the
letter
• Psychological impact should not be ignored
– Both parties tend to be committed to the
conclusions outlined and provides a roadmap
to envisioning the transaction through to
completion
– It assists in maintaining the parties’ commitment
during the ensuing detailed negotiations and
established the broad context in which the
details can be put in perspective.
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Stage 1: The Letter of Intent
– Binding Terms
• Exclusivity agreements in which seller agrees
not to negotiate a sale with third parties for
an agreed period of time
• Confidentiality agreements
• Expense agreements
•
17
Stage 1: The Letter of Intent
• May require buyer to pay the seller a
nonrefundable deposit for:
– granting an exclusivity period to the purchaser,
during which person the seller will not
negotiate with any other potential buyer
– the purposes of covering some of the seller’s
costs in the transaction if the seller is in a
particularly strong bargaining position
–
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Stage 1: Due Diligence
• Identify risks material to Buyer’s decision
whether or not to do the deal
• Identify risks/issues to be addressed in
transaction documents
• Identify any third-party consents needed
• Identify post-closing transition issues
•
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Stage 1: Initial Questions for
Buyer’s Legal Due Diligence Team
• What are client’s basic assumptions about target?
– Company profile (scope of business/nature of
assets)
• Structure of transaction?
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Stage 1: Initial Issues for
Seller’s Legal Team
• How much does legal team know about it
own client and risks?
• What major risks need to be disclosed and
how?
• Structure of transaction
• Level of Client’s organization of
documents/information?
• Identify appropriate point person(s)
• Have all Buyer parties signed NDA?
• What type of access should be provided (data
room/respond to document
21 requests/provide general access to files)?
Stage 1: Regulatory Matters
• Affirmative
– Require agency approval prior to closing
• Negative
– Filing with the relevant agency with closing
permitted if the agency does not act to
delay or stop the transaction within a
specified time period
• Informational
– Example: Filing of notices of the issuance
of unregistered securities with the SEC
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Regulatory Approvals – When
to Begin the Process?
• Seek after the letter of intent (stage 1) or
definitive agreement (stage 2) is signed
• Establish an approval strategy for difficult
regulatory approvals
• Consider starting approval process after letter
of intent to exhaust some of the waiting
period, if applicable
• Sellers resist public filings until the definitive
agreement is signed in order to avoid
publicity that can impact the transaction
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M&A Overview: Stage 2
LETTER OF INTENT DEFINITIVE AGREEMENT CLOSING
Stage 1 Stage 2 Stage 3
Find Target Due Diligence
Engage Ibanker Negotiate Detailed
Terms
Financial Analysis
Negotiate Ancillary
Preliminary Due
Agreements, e.g.,
Diligence
Employment
Negotiate Basic Agreements
l ae D sse ni s u B
Terms
24
Stage 2: Through the Definitive
Purchase Agreement
• Due Diligence
• Definitive Agreement
• Regulatory Approvals
•
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Stage 2: Due Diligence
• Business
• Legal
• Accounting
• Other key areas of interest (environmental
etc)
•
26
Stage 2: Due Diligence –
Legal Review
• Minute books and charter documents
• Issuance of securities
• Key contracts and loan documentation
• Governmental permits
• Employment matters
• Pending litigation
• Environmental proceedings
• Other fundamental legal matters affecting the
seller’s business
•
27
Stage 2: Due Diligence –
Accounting Review
• Financial statements
• Accounting practices
• Tax compliance
• Inventories
•
28
Stage 2: Due Diligence –
Specialists
• Environmental engineers
• Technical specialists
• Others, depending on nature of transaction
and business
•
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Due Diligence: Data Room
• Often used in large deals with multiple
bidders
• Also used when transaction is very
confidential (offsite data room)
• Keeps document disclosure organized
• Often limited time frames for access/puts
pressure on Buyer’s team
•
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Due Diligence: Buyer’s Approach
to Data Room Review
32
Stage 2: The Definitive
Agreement
• Specific identities of the parties
• Exact description of what is being sold
• Exact description of price and terms
• Lengthy and detailed representations and warranties of the
parties
• Each party’s agreements as to its conduct up to and beyond
the closing
• Conditions that must be filled before either party is obligated to
close
• Details on the time and mechanics of closing
• Indemnities related to breaches of the agreement or the
representations and warranties
• Dispute resolution provisions
• Miscellaneous clauses relating to any other aspects of the sale
•
33
Stage 2: Definitive Agreement-
Representations and Warranties
• Provide disclosure
• Provide foundation for other party to
terminate acquisition prior to closing
• Provide basis for other party’s right to
indemnification and other remedies
•
34
Stage 2: Definitive Agreement:
Standard Reps and Warranties
• Corporate organization
• Capitalization
• Authority, consents
• Regulatory matters
• Finances, accounting
• Litigation
• Taxes
• Employee matters
• Contracts
• Environmental matters
• Assets
• Catch-all (e.g., no material adverse effect/change)
35
Disclosure Schedule
(a.k.a. Schedule of Exceptions)
36
Considerations Regarding
R&Ws
• Party wants other party’s R&Ws to be broad, but its
own R&Ws to be narrow
• Qualifiers
– Knowledge
– Materiality
– Limited time period
• Timing
– Date of agreement
– Date of closing (“bring down”)
– Other date
• Survival
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Stage 2: The Definitive
Agreement
• Parties are obligated to complete the
transaction when definitive agreement is
signed
• Completion subject to various conditions to
closing
– stockholder approval
– regulatory approval
– third party approvals
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Stage 2: The Definitive Agreement
–Ancillary Documents
• Signed at closing:
– promissory notes
– security agreements
– bills of sale
– non-competition and employment
agreements
– escrow instructions
– officers’ certificates
– legal opinions
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Stage 2: Regulatory
Approvals
• Apply for approvals if process has not yet
begun
40
M&A Overview: Stage 3
LETTER OF INTENT DEFINITIVE AGREEMENT CLOSING
Stage 1 Stage 2 Stage 3
Find Target Due Diligence Proxy Statement
Engage Ibanker Negotiate Detailed Transition Preparation
Terms
Financial Analysis Closing Preparation
Negotiate Ancillary
Preliminary Due Final Due Diligence
Agreements, e.g.,
Diligence
Employment
Negotiate Basic Agreements
l ae D sse ni s u B
Terms
41
Stage 3: To the Closing
• Final due diligence
• Verify no change to the representations and
warranties
– If buyer discovers a material change, the
buyer may have an out and refuse to
close or threatens to abandon the
transaction
• Buyer prepares for management transitions
by becoming more familiar with operations
of company
• Final financing arrangements made
42
Stage 3: The Closing
43
Stage 3: The Closing
Documentation
• Title documents and officers certificates
• Final director and stockholder approval
• Any necessary third-party consents
•
44
Stage 3: Closing: Exchange
of Documents
• Parties will exchange all cash, stock, and
documents required under the agreement
such as
– notes
– stock certificates
– financing statements
– bills of sale
– deeds
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Stage 3: Regulatory Matters
• Need to be finalized before final closing can
occur
• Push for any needed consent
•
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M&A Overview: After the Closing
LETTER OF INTENT DEFINITIVE AGREEMENT CLOSING
Stage 1 Stage 2 Stage 3
Find Target Due Diligence Proxy Statement Complete
Transition
Engage Ibanker Negotiate Detailed Transition Preparation
Terms Deal with any
Financial Analysis Closing Preparation
problems
Negotiate Ancillary
Preliminary Due Final Due Diligence
Agreements, e.g.,
Diligence
Employment
Negotiate Basic Agreements
l ae D sse ni s u B
Terms
47
Stage 4: After the Closing
• Security interests perfected
– Filings with Department of Commerce and
SEC
48
Disclaimer
This information has been prepared for
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Recent M&A
US private equity fund may take over
Vishal Retail
Vishal Retail’s managing director Ram Chandra
50
CONT..
Phillips-Van Heusen to buy Tommy
Hilfiger for $3 bn
The deal includes approximately €1.9 billion
in cash ($2.6 billion) and €276 million
($379.9 million) in Phillips-Van Heusen
stock.
Phillips-Van Heusen will also assume €100
million ($137.6 million) in liabilities.
51
CONT.
Godrej to buy Nigerian soap maker Tura
Godrej Consumer Products Ltd announced on
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Thank you
This presentation is intended only
as a general discussion and should
not be regarded as legal advice.
For more information, please
contact Craig Lilly at 650.843.3232.