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Preface |
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Volume 1 Summary |
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Volume 2 Summary |
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Mergers, Acquisitions & Tender Offers Table of Contents |
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Chapter 1: |
Introduction |
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- § 1:1 : Scope of Book1-2
- § 1:2 : Scope of Chapter1-8
- § 1:3 : Introduction to Consensual Transactions1-8
- § 1:3.1 : The Starting Point: Valuation and Due Diligence1-8
- § 1:3.2 : Structuring the Transaction: Tax and Corporate Law Considerations1-9
- [A] : In General1-9
- [B] : Stock Purchase Structure1-10
- [C] : Asset Purchase Structure1-11
- [D] : Direct Merger Structure1-11
- [E] : Reverse Subsidiary Merger Structure1-12
- [F] : Forward Subsidiary Merger Structure1-13
- [G] : Compulsory Share Exchange Structure1-14
- [H] : Short-Form Merger Structure1-15
- § 1:3.3 : Drafting the Acquisition Agreement1-16
- § 1:3.4 : Federal Securities Laws Considerations1-17
- § 1:3.5 : Antitrust, Pre-Merger Notification, and Regulatory Considerations1-18
- § 1:4 : Introduction to Tender Offers and Related Transactions1-18
- § 1:5 : Do the Shareholders of the Target and Acquirer Benefit in Mergers and Acquisitions?1-21
- § 1:6 : Strategy for Approaching Mergers1-24
- § 1:7 : The Current M&A Scene1-26
- § 1:7.1 : Introduction1-26
- § 1:7.2 : Strategic, Private Equity, and SPAC Deals1-26
- § 1:7.3 : Past Trends in U.S. M&A Activity1-28
- § 1:7.4 : Introduction to Recent Data on the M&A Marketplace1-29
- § 1:7.5 : Recent Trends in U.S. M&A Activity1-31
- § 1:7.6 : Recent Trends in U.S. and Worldwide M&A Activity1-34
- § 1:7.7 : Recent U.S. M&A Volume Related to Aggregate GDP1-35
- § 1:7.8 : Recent U.S. M&A Volume As a Percentage of Aggregate GDP1-36
- § 1:7.9 : Recent U.S. M&A Volume Related to Investment Component of GDP1-38
- § 1:7.10 : Recent U.S. M&A Volume Related to the S&P 5001-40
- § 1:7.11 : Recent U.S. M&A Activity by Type of Transaction1-41
- § 1:7.12 : Recent P:E Ratios and Premiums Paid in U.S. Public Deals1-42
- § 1:7.13 : Recent U.S. Payment Trends: Cash, Stock, Mixed, and Other1-43
- § 1:7.14 : Recent Data on Acquisitions of Publicly Traded Companies1-45
- § 1:7.15 : Recent Data on Acquisitions of Privately Owned Companies1-46
- § 1:7.16 : Recent Private Equity Capital Raising and Equity Contributions1-47
- § 1:7.17 : Recent Data on U.S. Deal Size1-50
- § 1:7.18 : Recent Data on U.S. Regional Buyer Activity1-51
- § 1:7.19 : Recent Data on U.S. Regional Seller Activity1-52
- § 1:7.20 : Recent Data on Cross-Border M&A Activity1-53
- § 1:7.21 : Recent Data on the Top Ten Foreign Buyer Countries1-56
- § 1:7.22 : Recent Data on the Top Ten Foreign Seller Countries1-57
- § 1:7.23 : Recent Data on the Percentage of S&P 500 Companies with a Shareholder Rights Plan, Poison Pill1-58
- § 1:7.24 : Recent Data on the Percentage of S&P 500 Companies with Various Types of Defensive Measures1-59
- § 1:7.25 : Recent Data on U.S. Tender Offers, Contested and Uncontested, and Proxy Contests1-61
- § 1:7.26 : Recent Data on the Rise of Two-Step Transactions and the Top-Up Option1-62
- § 1:7.27 : Recent Data on U.S. Termination Fees1-63
- § 1:7.28 : Recent Data on Matching Rights in Negotiated Deals1-66
- § 1:7.29 : Recent Data on Go-Shops in Negotiated Deals1-66
- § 1:7.30 : Recent Information on Bankruptcies1-68
- § 1:7.31 : Recent ABA Deal Point Studies1-68
- § 1:7.32 : Recent Information on the Top Ten M&A Investment Banks and Law Firms Ranked by U.S. Deal Size1-68
- § 1:7.33 : Preliminary Report on M&A Activity in 20121-69
- § 1:8 : Introduction to Corporate Governance Issues Generally1-70
- § 1:8.1 : Background1-70
- § 1:8.2 : Overview of Corporate Governance at the State Level1-71
- § 1:8.3 : Overview of Corporate Governance at the Federal Level1-72
- § 1:8.4 : Overview of Corporate Governance Provisions in SOX1-72
- § 1:8.5 : Overview of Corporate Governance Provisions in Dodd-Frank1-73
- § 1:9 : Guide to References1-74
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Chapter 2: |
General Principles in Drafting an Acquisition Agreement—Merger Agreement, Asset Acquisition Agreement, and Stock Purchase Agreement; And Appendices 2A-2U |
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- § 2:1 : Scope2-11
- § 2:2 : Basic Principles of Contract Interpretation2-17
- § 2:2.1 : In General2-17
- § 2:2.2 : First Principle of Contract Interpretation: Clear Meaning2-18
- § 2:2.3 : Second Principle of Contract Interpretation: Parol Evidence2-18
- § 2:2.4 : Third Principle of Contract Interpretation: Forthright Negotiator2-19
- § 2:2.5 : Summary of the Three Principles2-20
- § 2:2.6 : Fourth Principle of Contract Interpretation: Implied Covenant of Good Faith and Fair Dealing2-20
- § 2:2.7 : Related Concept of Tortious Interference2-25
- [A] : Introduction2-25
- [B] : Illustrations—NACCO and Guidant2-26
- [C] : Tortious Interference with Prospective Advantage, Plus Punitive Damages—Ventas2-28
- § 2:2.8 : Potential Fraud Claim—NACCO, Airborne, and Narrowstep2-35
- § 2:2.9 : Reforming Contracts—Cambridge North2-40
- § 2:2.10 : Consciously Leaving Gaps in a Contract2-42
- § 2:3 : Introduction to Stock Purchase Agreements, Asset Acquisition Agreements, and Merger Agreements2-43
- § 2:4 : Advantages and Disadvantages of Stock Purchase Agreements, Asset Acquisition Agreements, and Merger Agreements2-44
- § 2:4.1 : Introduction2-44
- § 2:4.2 : Stock Purchase Agreements2-44
- § 2:4.3 : Asset Acquisition Agreements2-45
- § 2:4.4 : Merger Agreements2-46
- § 2:4.5 : Advantages of Ensuring That a Target Continues As a Subsidiary of the Acquirer2-47
- § 2:5 : Outline of Common Provisions of Acquisition Agreements2-47
- § 2:6 : The Parties to the Transaction2-49
- § 2:7 : The Whereas Clauses2-50
- § 2:8 : Defined Terms2-51
- § 2:9 : Description of the Basic Purchase and Sale or Merger Transaction2-51
- § 2:9.1 : Introduction2-51
- § 2:9.2 : Purchase Price Considerations, Including the Exchange Ratio2-51
- [A] : Introduction2-51
- [B] : Structuring the Cash Payment or Exchange Ratio in Public Company Mergers: Caps, Floors, and Collars2-52
- [B][1] : Cash Consideration2-52
- [B][2] : Fixed Exchange Ratio2-53
- [B][3] : Fixed Value Exchange Ratio2-54
- [B][4] : Floating Value Exchange Ratio with a Collar2-55
- [B][5] : Fixed Value Exchange Ratio with a Collar2-55
- [C] : Inclusion of a “Ticking Fee” Payable If the Closing Is Delayed—Dow–Rohm and Haas2-57
- [D] : Structuring the Purchase Price in a Stock Acquisition of a Closely Held Target2-58
- [E] : Structuring the Purchase Price, Assets to Be Acquired, and Liabilities to Be Assumed in an Asset Acquisition of a Closely Held Target2-59
- [F] : Post-Closing Purchase Price Adjustments, Escrows, and Earn-Outs2-62
- [F][1] : In General and the ABA, 2009 Private Target Deal Point Study2-62
- [F][2] : Working Capital and Net Worth Adjustments2-64
- [F][2][a] : Working Capital Adjustments2-64
- [F][2][b] : Net Worth Adjustments2-66
- [F][3] : Earn-Outs2-66
- [F][4] : Contingent Value Rights or CVRs2-69
- [F][5] : Binding the Target’s Shareholders to the Post-Closing Adjustment Process—Aveta2-71
- [G] : Addressing the Potential for Successor Liability for the Acquirer in an Asset Acquisition2-71
- [G][1] : In General2-71
- [G][2] : Successor Liability Under Bulk Sales Laws in Asset Acquisitions2-71
- [G][3] : Successor Liability Under State Tax Laws in Asset Acquisitions2-74
- [G][4] : Successor Liability for the Target’s Defective Products in Asset Acquisitions2-74
- [G][4][a] : Introduction2-74
- [G][4][b] : The Pennsylvania Approach2-75
- [G][4][c] : The California Approach2-76
- [G][4][d] : The New Jersey Approach2-78
- [G][4][e] : The Florida Approach2-78
- [G][5] : Successor Liability for the Target’s Environmental Torts in Asset Acquisitions2-79
- [G][6] : Successor Liability for the Target’s General Torts in Asset Acquisitions2-81
- [G][7] : Dealing with Potential Successor Liability in the Asset Acquisition Agreement2-83
- [G][8] : Successor Liability Under the Labor Laws2-84
- [G][9] : Determining the Applicable Law2-85
- [H] : Duty to Warn2-87
- [I] : Dealing with the Treatment of a Target’s Outstanding Stock Options2-88
- [J] : Special Issues in the Acquisition of a Division or Subsidiary2-89
- [J][1] : Introduction2-89
- [J][2] : Dealing with Financials of the Acquired Business2-90
- [J][3] : Dealing with Assets and Liabilities and “Right-Sizing” the Acquired Business2-90
- [J][4] : Properly Structuring the Seller’s Representations, Warranties, and Covenants2-90
- [J][5] : Post-Acquisition Support Agreement2-91
- [J][6] : Potential for Breach of Fiduciary Duty with Respect to a Support Agreement2-91
- § 2:10 : The Representations and Warranties: The Snapshot2-93
- § 2:10.1 : In General2-93
- § 2:10.2 : Disclosure Schedules2-96
- [A] : In General2-96
- [B] : Disclosure Under One Representation Recognized Under Another Representation2-97
- [C] : Post-Signing Amendments to the Disclosure Schedule2-99
- § 2:10.3 : Materiality Qualification2-99
- § 2:10.4 : Material Adverse Effect Qualifier and Relationship to Material Adverse Change2-100
- § 2:10.5 : Knowledge Qualification2-102
- [A] : In General2-102
- [B] : Whose Knowledge?2-103
- [C] : What Is Knowledge?2-103
- [D] : Particular Importance in Private Deals2-104
- [E] : Dueling Qualified and Non-Qualified Representations—DCV2-104
- § 2:10.6 : Common Target Representations and Warranties2-106
- [A] : Introduction2-106
- [B] : Organization, Standing, and Power2-107
- [C] : Capital Structure2-108
- [D] : Authority to Enter the Agreement, No Conflict, and Required Consents2-109
- [D][1] : In General2-109
- [D][2] : Dealing with Change of Control Provisions in Contracts2-111
- [E] : Financial Statements, SEC Documents, and SOX Issues2-112
- [E][1] : In General: GAAP and Fairly Presents2-112
- [E][2] : Impact of FIN 48 on GAAP Representation and Warranty2-113
- [E][3] : Specific Representation Regarding Compliance with Internal Control and Disclosure Control Requirements of SOX2-113
- [E][4] : The ABA Deal Point Studies2-115
- [F] : No Undisclosed Liabilities2-115
- [F][1] : In General2-115
- [F][2] : The ABA Deal Point Studies2-116
- [G] : Absence of Certain Changes: No MAC or MAE Since Last Financials2-116
- [H] : Compliance with Applicable Laws and Reporting Requirements2-119
- [H][1] : In General2-119
- [H][2] : The ABA Deal Point Studies2-120
- [I] : Litigation2-121
- [J] : Taxes2-125
- [J][1] : In General2-125
- [J][2] : Dealing with the Foreign Investment in Real Property Tax Act (FIRPTA) in Stock Purchase Agreements2-130
- [K] : Material Agreements to Which the Target Is a Party2-131
- [L] : Benefit Plans2-133
- [M] : Labor and Employment Matters2-134
- [N] : Subsidiaries2-136
- [O] : Environmental2-136
- [P] : Properties and Sufficiency of Assets2-137
- [Q] : Intellectual Property2-139
- [R] : Insurance2-140
- [S] : Brokers or Finders2-140
- [T] : Approval of the Agreement by the Target’s Board and No Takeover Statutes2-141
- [U] : Shareholder Vote Required to Approve the Transaction2-142
- [V] : Opinion of Financial Adviser2-142
- [W] : Inapplicability of the Target’s Poison Pill2-142
- [X] : No Restrictions on Business Activities2-143
- [Y] : Certain Business Practices, Including Compliance with the Foreign Corrupt Practices Act of 19772-143
- [Z] : Addressing Receivables and Payables2-145
- [AA] : List of Customers and Suppliers2-146
- [AB] : No Power of Attorney2-146
- [AC] : Complete Copies of Materials2-147
- [AD] : The 10b-5—No Nondisclosure or Misrepresentation—Representation2-147
- [AD][1] : In General2-147
- [AD][2] : The ABA Deal Point Studies2-148
- [AE] : No Other Representations or Warranties—The Anti-Reliance Clause2-148
- [AE][1] : Introduction2-148
- [AE][2] : Delaware Law Approach to “Anti-Reliance” Clauses2-150
- [AE][3] : Rule 10b-5 Approach to “Non-Reliance” Clauses2-152
- [AE][4] : The ABA Deal Point Studies2-153
- [AF] : Representations Commonly Found in Stock Purchase Agreements2-154
- [AF][1] : Introduction2-154
- [AF][2] : Bank Accounts2-154
- [AF][3] : Affiliated Transactions2-154
- [AF][4] : Books and Records2-154
- [AG] : Representations Commonly Found in Asset Acquisition Agreements2-155
- [AG][1] : Introduction2-155
- [AG][2] : Product Liability2-155
- [AG][3] : Product Returns and Warranties2-155
- [AG][4] : No Defaults in Agreements of the Target to Be Transferred to Acquirer; Novations2-156
- [AH] : Additional Representations of Selling Shareholders in Stock Acquisition Agreements2-157
- [AI] : Securities Law Representations from Selling Shareholders Where the Consideration Is Unregistered Securities of the Acquirer2-158
- [AI][1] : Introduction2-158
- [AI][2] : Selling Shareholder’s Representations Relating to Private Offering2-158
- § 2:10.7 : Common Acquirer Representations and Warranties2-160
- [A] : Introduction2-160
- [B] : Common Representations Found in Both the Toys and Taleo–JobFlash Cash Consideration Agreements2-161
- [C] : The Financing Representation2-161
- [D] : The Solvency Representation2-162
- [E] : Representation That Stock Is Purchased for Investment2-163
- [F] : Delaware Section 203 Representation2-164
- [G] : Acquirer’s Due Diligence Representation—Hudson’s Bay2-164
- § 2:11 : Covenants: The Undertakings2-166
- § 2:11.1 : Introduction2-166
- § 2:11.2 : The “Efforts” Clause2-168
- § 2:11.3 : Common Covenants by Targets and Selling Shareholders in the “Covenants Relating to the Conduct of the Business” Article2-170
- [A] : Introduction2-170
- [B] : Ordinary Course2-170
- [C] : No Extraordinary Dividends and Other Adjustments2-171
- [D] : No Issuances of New Securities2-172
- [E] : No Amendments to Governing Documents2-172
- [F] : No Major Acquisitions or Dispositions2-172
- [G] : Indebtedness2-173
- [H] : Other Actions Not to Cause Representations to Become Untrue2-174
- [I] : Accounting Methods and Tax Matters2-174
- [J] : Tax-Free Qualification of the Transaction2-175
- [K] : Compensation and Benefit Plans2-175
- [L] : No Liquidation2-176
- [M] : Litigation2-176
- [N] : No Restrictions on Business2-176
- [O] : Other Agreements2-176
- [P] : Requirement That Target Adopt a Poison Pill—Compellent2-177
- § 2:11.4 : Common Covenants in the “Additional Agreements” Article2-178
- [A] : Introduction2-178
- [B] : Additional Covenants Generally Found in All Acquisition Agreements2-178
- [B][1] : Access to Information2-178
- [B][2] : Further Action and Reasonable Best Efforts, Specifically with Regard to Antitrust Approval2-180
- [B][2][a] : Introduction2-180
- [B][2][b] : The Case Law on Efforts—Huntsman, Narrowstep, and Wave2-183
- [B][3] : Confidentiality2-186
- [C] : Additional Covenants Relating to the Acquisition of a Publicly Held Target2-187
- [C][1] : Covenant Relating to Preparation of the Form S-4 Registration Statement and Proxy Statements for the Acquisition by a Public Acquirer of a Public Target for Stock2-187
- [C][2] : Covenant Relating to Preparation of the Proxy Statements for the Acquisition of a Public Target for Cash2-190
- [C][3] : Covenant Relating to the Holding by a Public Target of a Shareholders’ Meeting2-191
- [C][4] : “No Solicitation”: Acquisition Proposals and Break-Up Fees in Public Deals2-192
- [C][4][a] : In General2-192
- [C][4][b] : Breach of Acquisition Proposal—NACCO and Guidant2-193
- [C][5] : “No Impairment” Covenant2-198
- [C][6] : Governance Covenant in “Mergers of Equals”2-198
- [C][7] : Target’s Covenant to Adopt a Poison Pill—Compellent2-198
- [C][8] : Other Covenants Relating to the Acquisition of a Public Target2-199
- [D] : “No Solicitation” Covenant in Stock Purchase Agreements and Asset Acquisition Agreements2-199
- [D][1] : Introduction2-199
- [D][2] : The Case Law on Private Company “No Solicitation” Covenants—Wave2-201
- [E] : Resignation of Target’s Directors2-202
- [F] : Covenant Relating to Notification of Changes and Amendments to Disclosure Schedule2-202
- [G] : Covenants Relating to the Post-Closing Period2-204
- [G][1] : Introduction2-204
- [G][2] : Indemnification, Directors’ and Officers’ Insurance Post-Closing2-204
- [G][2][a] : In General2-204
- [G][2][b] : ABA Deal Point Studies Relating to D&O Insurance2-206
- [G][2][c] : 2009 Amendment to DGCL Regarding Amendments to an Indemnification Provision2-206
- [G][3] : Non-Competition Post-Closing Covenant2-207
- [G][4] : Benefit and Labor Law Post-Closing Covenants2-209
- [G][4][a] : In General2-209
- [G][4][b] : The WARN Act Covenant2-209
- [H] : Registration Rights Post-Closing Covenant2-210
- [I] : Post-Closing Further Action2-210
- [J] : Merger of Equals and Other Social Covenants2-211
- § 2:12 : Conditions to Closing and the Closing2-213
- § 2:12.1 : Introduction2-213
- [A] : General Principles2-213
- [B] : Acquirer Faced with What It Thinks Are Failed Conditions2-214
- [B][1] : Actual Failed Condition and Acquirer Walks2-214
- [B][2] : Actual Failed Condition but Acquirer Closes and Sues2-215
- [B][3] : Acquirer Walks but Condition Found to Be Satisfied2-215
- [C] : Target Faced with What It Thinks Are Failed Conditions2-216
- [C][1] : Actual Failed Condition and Target Walks2-216
- [C][2] : Target Walks but Condition Found to Be Satisfied2-216
- [D] : Who Has the Burden of Proof That a Condition Failed?2-217
- [E] : The Concept of “Anticipatory Repudiation”2-217
- § 2:12.2 : Standard Conditions to Closing2-219
- § 2:12.3 : The Accuracy of Representations and Warranties (Other than MAC or MAE) Condition2-220
- [A] : Introduction2-220
- [B] : The Bring-Down2-221
- [C] : Reason for a Materiality Qualification2-223
- [D] : The Avoidance of Double Materiality2-223
- [E] : The “Back Door No” MAE or MAC2-224
- [F] : Illustrations2-225
- [F][1] : Damages Imposed on an Acquirer Who Walked on the Basis of Purported False Environmental Representation—Bay Industries2-225
- [F][2] : Acquirer Who Walked on the Basis of Purported False Financial Representation Subject to Specific Performance—IBP2-226
- § 2:12.4 : The “No Material Adverse Change (MAC) or Effect (MAE)” Condition2-227
- [A] : Introduction2-227
- [B] : ABA Deal Point Studies Relating to MACs and MAEs2-229
- [C] : Survey of Cases Illustrating the Impact of the MAC/MAE Condition2-230
- [C][1] : Finding That There Was a MAC Giving the Acquirer the Right to Walk—Katz2-230
- [C][2] : Finding That There Was an MAE Giving a Target the Right to Walk—Allegheny2-230
- [C][3] : Specific Performance Ordered Against an Acquirer Who Walked Because of an MAE Condition—IBP2-233
- [C][4] : Alleged Breach of MAE Clause Relating to Environmental Liabilities—Frontier2-236
- [C][5] : Finding of a Material Adverse Change, but the Change Was Covered by a Carve-Out—Genesco2-236
- [C][5][a] : In General2-236
- [C][5][b] : The Impact of the Carve-Out2-237
- [C][5][c] : Did an MAE Occur?2-238
- [C][6] : Finding of No Material Adverse Effect and Willful and Intentional Breach by Acquirer—Huntsman2-240
- [C][6][a] : General Background2-240
- [C][6][b] : The MAE Issue2-243
- [C][6][c] : The “Knowing and Intentional” Issue2-246
- [C][6][d] : The Solvency Issue and the Remedy2-249
- [C][6][e] : Summary2-250
- [C][7] : Two Polar Opposite Approaches to the Definition of “MAE” in 2008 Credit Crisis Deals, Mitsubishi–Morgan Stanley and Wells Fargo–Wachovia2-251
- [C][7][a] : In General2-251
- [C][7][b] : The Mitsubishi–Morgan Stanley Deal2-251
- [C][7][c] : The Wells Fargo–Wachovia Deal2-251
- [C][8] : The Carve-Out to the Carve-Out in Exxon–XTO2-253
- [D] : The Market MAC2-254
- § 2:12.5 : The Performance of Covenants Condition2-256
- § 2:12.6 : The Confirming Certificate Condition2-256
- § 2:12.7 : The Financing or Absence of Financing Conditions—Dow Contrasted with Pfizer2-257
- [A] : Introduction2-257
- [B] : Credit Rating System by Moody’s and S&P2-257
- [C] : The Dow–Rohm and Haas “Ironclad” Agreement2-259
- [D] : The Financing Condition in the Pfizer–Wyeth Deal2-268
- § 2:12.8 : The Legal Opinion Condition2-272
- [A] : Introduction2-272
- [B] : Items Covered in Legal Opinions2-274
- § 2:12.9 : Employment Contracts and Non-Competition Conditions2-275
- § 2:12.10 : Other Conditions2-276
- [A] : Due Diligence2-276
- [B] : Bring-Down of Fairness Opinion2-277
- [C] : Limit on Dissenting Shares2-277
- § 2:12.11 : The Mechanics of Closing2-277
- § 2:13 : Termination2-279
- § 2:13.1 : In General2-279
- § 2:13.2 : Illustration of Termination Provision with Break-Up Fee2-280
- § 2:13.3 : Reverse Break-Up Fees2-281
- [A] : Introduction2-281
- [B] : How an Acquirer Should Not Draft “Reverse Break-Up” Fee Provisions—United Rentals and the Forthright Negotiator2-282
- [C] : How to Draft an Ironclad “Reverse Break-Up” Fee Providing Optionality—The Mars–Wrigley Merger2-288
- [D] : Will a Reverse Break-Up Fee Be the Only Remedy in the Face of a “Willful” or “Fraudulent” Breach?2-295
- [E] : Target Is Unsuccessful in Requiring Acquirer to Pay a Reverse Termination Fee—ADS2-297
- [F] : DynCorp’s Double Trigger Reverse Termination and Termination Fees2-301
- [G] : ABA Deal Point Study Relating to Reverse Break-Up Fees2-304
- [H] : The AT&T Reverse Termination Fee Paid as a Result of the Failed Acquisition of T-Mobile2-304
- § 2:13.4 : Seeking Damages Above the Break-Up and Reverse Break-Up Fees—Willful, Knowing, Intentional Breaches—Guidant and Huntsman2-305
- § 2:14 : Survival of Representations and Warranties2-307
- § 2:14.1 : Introduction2-307
- § 2:14.2 : What Is the Meaning of the Term “Survive”?2-308
- [A] : General Principles and the California Approach2-308
- [B] : How Should “Survival” Clauses Be Drafted?2-312
- § 2:14.3 : What Impact Does a Survival Clause Have on a Fraud, Willful Misrepresentation, or Rule 10b-5 Claim?2-313
- § 2:14.4 : Is “Reliance” an Element of a Post-Closing Claim That a Party Breached a Representation—The Sandbagging Issue2-313
- § 2:15 : Indemnification2-319
- § 2:15.1 : Introduction2-319
- § 2:15.2 : Period During Which an Indemnification Claim May Be Filed2-320
- § 2:15.3 : The Basic Indemnification Requirement2-321
- [A] : In General2-321
- [B] : Materiality “Rub Off” or “Scrape”2-325
- [C] : Meaning of the Term “Indemnification”—Ceradyne2-326
- § 2:15.4 : Baskets, Thresholds and Ceilings2-328
- [A] : In General2-328
- [B] : Is a Severance Fee Covered by the General Capped Indemnification Provision or the Un-Capped Tax Indemnification Provision?—Innophos2-329
- § 2:15.5 : Escrow Accounts, Holdbacks and Deferred Payment Notes2-331
- [A] : In General2-331
- [B] : Relationship Between Indemnification Provision and Working Capital Purchase Price Adjustment—Brim2-331
- § 2:15.6 : Limitations on Liability2-332
- [A] : In General2-332
- [B] : Is an Exclusive Indemnification Provision with a Ceiling the Only Remedy in the Event of Fraud?—ABRY2-333
- § 2:15.7 : Procedural Aspects of Indemnification2-336
- § 2:15.8 : ABA Deal Point Studies2-336
- § 2:15.9 : Illustration of Interface Among Representations, Covenants, Conditions and Indemnification—Ameristar2-336
- § 2:15.10 : Duty to Mitigate2-345
- § 2:16 : General Provisions2-345
- § 2:16.1 : In General2-345
- § 2:16.2 : Third-Party Beneficiaries2-346
- [A] : In General2-346
- [B] : Specifically Providing That the Target’s Shareholders Are Entitled to the “Economic Benefit” of the Deal—InBev2-347
- [C] : Rights of Retirees of Target to Enforce a Provision of the Merger Agreement Relating to a Retiree Medical Plan—Halliburton2-348
- § 2:16.3 : Enforcement and Specific Performance2-350
- § 2:16.4 : Possible Remedies2-353
- § 2:16.5 : Arbitration2-353
- § 2:16.6 : Possible Efficient Breach2-355
- § 2:17 : The Two-Step Tender Offer Followed by Merger Agreement2-356
- § 2:17.1 : Introduction2-356
- § 2:17.2 : Provisions of the Agreement Governing the Tender Offer2-357
- § 2:17.3 : The “Top-Up Option”2-358
- [A] : In General2-358
- [B] : Potential Challenges to Top-Up Options—ev32-359
- § 2:17.4 : The Second-Step Merger2-361
- § 2:17.5 : Illustration of a Transaction with a Top-Up Option—Metromedia2-363
- § 2:17.6 : Alternative Two-Step, One-Step Burger King Merger Agreement2-364
- § 2:17.7 : ABA Deal Point Studies2-364
- § 2:18 : Merger Agreement Between a Corporation and a Limited Liability Company2-365
- § 2:19 : Checklist of Provisions That Might Be Included in an Acquisition Agreement2-365
- Appendix 2A : Taleo–JobFlash Asset Acquisition AgreementApp. 2A-1
- Appendix 2B : Fortress–SMLB Stock Purchase AgreementApp. 2B-1
- Appendix 2C : Sirius–XM Reverse Subsidiary Stock Merger AgreementApp. 2C-1
- Appendix 2D : Toys “R” Us Reverse Subsidiary Cash Merger AgreementApp. 2D-1
- Appendix 2E : Koch–Georgia Pacific, Tender Offer/Merger Agreement with Top-Up OptionApp. 2E-1
- Appendix 2F : Mars–Wrigley Merger—Reverse Break-Up Fee ProvisionsApp. 2F-1
- Appendix 2G : InBev–Anheuser-Busch Cross Border Cash Merger, Termination and Third-Party Beneficiary ProvisionsApp. 2G-1
- Appendix 2H : H&R Block–Option One Asset Purchase AgreementApp. 2H-1
- Appendix 2I : International Paper–Weyerhaeuser Asset Purchase AgreementApp. 2I-1
- Appendix 2J : Yildiz–Campbell Soup Stock Purchase AgreementApp. 2J-1
- Appendix 2K : Oracle–Siebel Horizontal Double Dummy Merger AgreementApp. 2K-1
- Appendix 2L : Bank of America–LaSalle Bank Stock Purchase AgreementApp. 2L-1
- Appendix 2M : J.P. Morgan–Bear Stearns Reverse Subsidiary Merger Agreement—Deal Protection DevicesApp. 2M-1
- Appendix 2N : Bank of America–Countrywide, Direct Subsidiary Merger into Limited Liability SubsidiaryApp. 2N-1
- Appendix 2O : Dow Chemical Acquisition of Rohm and Haas in an “Ironclad” Reverse Subsidiary Cash Merger with a “Ticking Fee”App. 2O-1
- Appendix 2P : Pfizer–Wyeth Merger Agreement, Provisions Related to Cash and Stock Considerations, Financing, and Termination and Reverse Termination FeesApp. 2P-1
- Appendix 2Q : Sample Transitional Services Agreement Relating to the Purchase of a DivisionApp. 2Q-1
- Appendix 2R : Cerberus’s Acquisition of DynCorp, Double Trigger Termination and Reverse Termination FeesApp. 2R-1
- Appendix 2S : Burger King Two-Step or One-Step Merger AgreementApp. 2S-1
- Appendix 2T : Sanofi’s Acquisition of Genzyme—The CVRApp. 2T-1
- Appendix 2U : Dell’s Acquisition of Compellent, Requirement That Compellent Adopt a Poison PillApp. 2U-1
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Chapter 3: |
Confidentiality Agreements, Due Diligence, Letters of Intent and Exclusivity Agreements; And Appendices 3A-3E |
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- § 3:1 : Scope3-3
- § 3:2 : Confidentiality Agreements3-4
- § 3:2.1 : Introduction3-4
- [A] : In General3-4
- [B] : Keeping Your Eye on the Ball3-5
- § 3:2.2 : Opening Paragraph3-5
- § 3:2.3 : Defined Terms3-6
- [A] : In General3-6
- [B] : Addressing Antitrust and Attorney-Client Privilege Issues3-6
- § 3:2.4 : Agreement to Keep “Information” Confidential3-8
- § 3:2.5 : Nondisclosure of Negotiations3-8
- § 3:2.6 : If No Agreement Is Reached, Destroy or Return Information3-9
- § 3:2.7 : Information That Becomes Public or Independently Developed Information3-9
- § 3:2.8 : No Representations—Anti-Reliance Clause3-9
- § 3:2.9 : Legal Compulsion to Disclose3-9
- § 3:2.10 : No Binding Contract; No Offer to Sell Securities3-10
- § 3:2.11 : Information Remains Property of Provider3-10
- § 3:2.12 : Termination of Acquirer’s Obligation: Sunset3-10
- § 3:2.13 : To Whom Request for Information Should Be Directed3-10
- § 3:2.14 : Access to Employees and No Recruitment of Employees3-10
- § 3:2.15 : No Waiver, Successors, Equitable Relief, Choice of Law3-11
- § 3:2.16 : Standstill Provision3-11
- [A] : In General3-11
- [B] : Standstills and Fiduciary Duties—Topps3-13
- [C] : A Standstill Is Not a “No Shop”—Crane3-15
- [D] : Even Without a Standstill, an Acquirer with Confidential Information May Not Be Able to Make a Tender Offer3-17
- [E] : Delaware Supreme Court’s Interpretation of the “Stealth” Standstill in Vulcan3-18
- § 3:2.17 : Relationship Between the Confidentiality Agreement and the Acquisition Agreement3-22
- § 3:2.18 : Impact of Regulation FD3-23
- § 3:2.19 : Most Favored Nation Clause3-24
- § 3:2.20 : Non-Completion Fee3-24
- § 3:2.21 : No Teaming Provision—Del Monte3-24
- § 3:3 : Due Diligence Investigation in Connection with Acquisitions3-25
- § 3:3.1 : Introduction3-25
- § 3:3.2 : Planning for the Due Diligence Process3-27
- [A] : Identifying Substantive Issues3-27
- [B] : Addressing Change of Control Provisions in Indentures and Other Contracts3-28
- [B][1] : In General3-28
- [B][2] : Delaware Chancery Court Addresses Amylin’s Poison Put3-29
- [B][3] : Dealing in Mergers with Anti-Assignment Clauses in Contracts3-30
- [B][4] : Delaware Supreme Court’s Interpretation of a Successor Obligation Provision of an Indenture—Liberty Media3-30
- [C] : Procedural Issues: The Due Diligence Report; Due Diligence Request List3-31
- [D] : Addressing Risks Identified in the Due Diligence Process3-32
- § 3:3.3 : Addressing the Fundamental Economics of the Deal3-32
- § 3:3.4 : Addressing Items Related to Legal Mechanics and Risks in the Deal3-33
- [A] : Introduction3-33
- [B] : Purpose of Corporate Review by Acquirer’s Counsel3-33
- [C] : Procedures for Corporate Review3-34
- [D] : Corporate Review Memorandum3-37
- § 3:4 : Letters of Intent3-38
- § 3:4.1 : Introduction3-38
- § 3:4.2 : When Does a Letter of Intent Become a Binding Contract?3-39
- [A] : General Principles Governing Preliminary Contracts3-39
- [B] : Illustrative Case Law—American Cyanamid, Texaco, Skycom, and Global Asset3-41
- [B][1] : Introduction3-41
- [B][2] : American Cyanamid3-41
- [B][3] : Texaco3-44
- [B][4] : Skycom3-45
- [B][5] : Global Asset3-47
- [C] : Binding and Non-Binding Provisions3-50
- [D] : The Duty to Negotiate in Good Faith3-50
- § 3:4.3 : The Deal3-50
- § 3:4.4 : Exclusive Dealing3-51
- § 3:4.5 : Break-Up Fees3-51
- § 3:4.6 : Access to Information3-51
- § 3:4.7 : Confidentiality3-51
- § 3:4.8 : Standstill Provisions3-52
- § 3:5 : Exclusivity Agreements3-52
- Appendix 3A : Confidentiality Agreement, Koch–Georgia PacificApp. 3A-1
- Appendix 3B : Acquirer’s Due Diligence Checklist for TargetApp. 3B-1
- Appendix 3C : Letter of Intent, PerfectData–SonaApp. 3C-1
- Appendix 3D : Exclusivity Agreement Between Citigroup and WachoviaApp. 3D-1
- Appendix 3E : Amylin 2007 Private Placement of Convertible Notes, Indenture Provisions Relating to Mergers and Change of ControlApp. 3E-1
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Chapter 4: |
Structuring Mergers, Asset Acquisitions, and Compulsory Share Exchanges |
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- § 4:1 : Scope4-4
- § 4:2 : Voting and Dissenting Rights in Stock Acquisitions4-6
- § 4:3 : Stock Exchange Voting Requirements4-6
- § 4:3.1 : Approval by Acquirer’s Shareholders4-6
- § 4:3.2 : Approval by Target’s Shareholders on the Issuance of Target’s Stock to Acquirer As a Deal Protection Measure4-7
- § 4:4 : Mergers Between Corporations and Other Entities Such As Limited Liability Companies4-8
- § 4:5 : Delaware Long-Form Merger Provisions: Acquisition of a Non-90% Controlled Target by Merger4-9
- § 4:5.1 : Introduction4-9
- § 4:5.2 : Direct Merger of Domestic Delaware Corporations4-9
- [A] : In General4-9
- [B] : Alternative Transaction Structures4-10
- § 4:5.3 : Legal Effect in Delaware of a Merger on the Merging Corporations with Illustration4-10
- [A] : Introduction4-10
- [B] : Dealing in Mergers with Anti-Assignment Clauses for Patents, Copyrights, and Other Intellectual Property—PPG, SQL, Meso Scale, and Cincom4-11
- § 4:5.4 : Required Provisions of a Merger Agreement and Board Approval with Illustrations4-15
- § 4:5.5 : Terms Dependent Upon Facts Outside the Merger Agreement4-19
- § 4:5.6 : Required Shareholder Approval4-21
- [A] : General Shareholder Voting Rule4-21
- [B] : No Shareholder Vote for Acquirer’s Shareholders in Certain Mergers4-22
- [C] : Generally No Class Vote4-24
- [D] : No Shareholder Vote on Formation of Certain Holding Companies4-24
- [E] : Setting of Record Date for Notice of Meeting and Record Date for Vote4-25
- § 4:5.7 : “Force the Vote” Provisions4-26
- § 4:5.8 : The Filing Requirement with Illustration4-27
- § 4:5.9 : Provisions Relating to Amendments to and Termination of the Merger Agreement with Illustration4-28
- § 4:5.10 : Triangular (or Subsidiary) Mergers in Delaware4-29
- [A] : Introduction4-29
- [B] : Illustration of a Reverse Subsidiary Merger with Stock As the Consideration4-31
- [C] : Illustration of a Reverse Subsidiary Merger with Cash As the Consideration4-33
- [D] : Amending the Certificate of Incorporation and By-Laws of the Survivor in a Reverse Triangular Merger and Replacing Its Officers and Directors4-35
- § 4:5.11 : Mergers of Delaware and Non-Delaware Corporations4-36
- § 4:5.12 : Dissenters’ Rights in Long-Form Mergers Under Delaware Law4-37
- [A] : When Appraisal Is Available in a Long-Form Merger4-37
- [A][1] : General Rule4-37
- [A][2] : Do Preferred Shareholders Have Appraisal Rights?4-38
- [A][3] : The 20% Stock Issuance Exception4-39
- [A][4] : The “Market-Out” Exception4-39
- [A][4][a] : In General4-39
- [A][4][b] : Use of Long-Form Merger to Avoid Dissenters’ Rights in a Short-Form Merger4-41
- [A][4][c] : The Market-Out Exception to Appraisal Rights in a Cash/Stock Election Merger, Wesco4-41
- [A][5] : Appraisal Rights in a Certificate of Incorporation4-43
- [B] : How Does a Shareholder Seek Appraisal?4-43
- [B][1] : General Rules4-43
- [B][2] : Elaboration on the Record Holder Requirement4-44
- [B][3] : Perfection of Appraisal Rights4-46
- [B][3][a] : Introduction4-46
- [B][3][b] : Pre-Merger Shareholder Notice Requirement4-46
- [B][3][c] : Pre-Merger Shareholder Demand and “No” Vote Requirement4-46
- [B][3][d] : Post-Merger Notice to Shareholder Requirement4-47
- [B][4] : No Votes or Dividends on Appraisal Shares4-47
- [C] : What Are the Procedures After Demand for Appraisal Has Been Made?4-47
- [D] : What Are the Standards for Determining the “Fair Value” of the Shares?4-48
- [D][1] : The Exclusivity Condition4-48
- [D][2] : The All Relevant Factors Condition4-49
- [D][3] : Do Not Consider Minority or Marketability Discounts; Focus on Going Concern Value4-51
- [D][4] : Recent Approaches to Determine Fair Value—AXA Financial, Hanover, and Golden Telecom4-51
- [E] : Determining a “Fair Rate of Interest”4-56
- [F] : Other Procedural Aspects of Appraisal Proceedings4-56
- [G] : Characterization of Unissued Shares of Surviving Corporation4-57
- [H] : Exclusivity of Appraisal Proceedings in Delaware4-57
- [I] : Disclosure Standard in Transaction with Appraisal Rights4-59
- [J] : Illustration of Proxy Statement Disclosure of Appraisal Rights Under the DGCL4-60
- § 4:6 : The MBCA Long-Form Merger and Share Exchange Provisions: Acquisition of a Non-90% Controlled Target by Merger4-65
- § 4:6.1 : Introduction4-65
- § 4:6.2 : Essential Differences Between the MBCA and the DGCL4-65
- [A] : Vote of Shareholders of Acquiring Corp Parent in Certain Triangular Reorganizations Under the MBCA4-65
- [B] : Class Vote Required Under the MBCA4-66
- [C] : Quorum and Voting Rule Under the MBCA4-66
- [D] : The Market-Out Exception to Appraisal Rights Under the MBCA4-67
- § 4:6.3 : The Compulsory Plan of Share Exchange Under MBCA § 11.034-68
- § 4:7 : The Delaware Sale of “All or Substantially All” of Assets Provision4-69
- § 4:7.1 : Introduction4-69
- § 4:7.2 : Sale of Assets Provisions Under the DGCL4-69
- § 4:7.3 : No Impact on Acquirer4-70
- § 4:7.4 : Dissolution Following Sale of Assets Under the DGCL4-71
- § 4:7.5 : Tax Impact Determined by Consideration Paid4-72
- § 4:7.6 : No Dissenters’ Rights Under the DGCL4-72
- § 4:7.7 : Determination of Meaning of “Substantially All” of the Assets Under the DGCL4-72
- [A] : In General4-72
- [B] : Sale of Assets of a Subsidiary4-76
- [C] : Delaware Supreme Court’s Interpretation of “Substantially All” Provision of an Indenture—Liberty Media4-76
- § 4:7.8 : Illustration of Treatment of the Voting Requirement Under the DGCL in an Asset Acquisition Agreement4-76
- § 4:8 : The MBCA Analogue to Sale of “Substantially All” of the Assets Provision4-78
- § 4:8.1 : Introduction4-78
- § 4:8.2 : Sales Leaving the Corporation “Without a Significant Continuing Business” Under the MBCA4-78
- § 4:8.3 : The Required Shareholder Vote Under the MBCA4-79
- § 4:8.4 : Sales in Connection with Dissolutions Under the MBCA4-79
- § 4:8.5 : Dissenters’ Rights Under the MBCA4-80
- § 4:9 : The De Facto Merger Doctrine4-80
- § 4:9.1 : Introduction4-80
- § 4:9.2 : Absence of a De Facto Merger Principle in Delaware and Many Other Jurisdictions4-81
- § 4:10 : Short-Form Mergers4-83
- § 4:10.1 : Introduction4-83
- § 4:10.2 : Short-Form Mergers Under Section 253 of the DGCL4-84
- [A] : In General and Roam-Tel4-84
- [B] : Elaboration on the Disclosure Requirement in Short-Form Mergers4-87
- [B][1] : General Principles4-87
- [B][2] : The Quasi-Appraisal Remedy—Gilliland and Berger4-88
- [C] : Inapplicability of the Entire Fairness Doctrine in Short-Form Mergers—Glassman4-90
- [D] : Disclosure Claim After Seeking Appraisal—Aristotle4-91
- [E] : Short-Form Merger with Parent Non-Corporate Entity4-91
- § 4:10.3 : Short-Form Mergers Under the MBCA4-91
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Chapter 5: |
Fiduciary Duties of Directors, Officers, and Controlling Shareholders; And Appendices 5A-5E |
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- § 5:1 : Scope5-8
- § 5:2 : Directors’ Fiduciary Duties Under Delaware Law5-10
- § 5:2.1 : Introduction5-10
- § 5:2.2 : The Duty of Loyalty—Guth v. Loft5-11
- § 5:2.3 : The Duty of Care—Lutz v. Boas5-11
- § 5:2.4 : The Business Judgment Rule—Van Gorkom5-12
- § 5:2.5 : The Disclosure Duty5-14
- [A] : Introduction—Arnold, Checkfree, Skeen, Ganter, and Malone5-14
- [B] : Disclosure Issues Involving Investment Bankers5-16
- [B][1] : Introduction5-16
- [B][2] : General Obligation to Disclose Regarding the Fairness Opinion—Pure Resources and Checkfree5-17
- [B][3] : Different Views on the Need to Disclose Management’s Projections Used by Investment Bankers—3Com, Maric, and Orchid5-18
- [B][4] : Disclosure of Previous Work Done by the Target’s Investment Banker for the Acquirer—Art Technologies5-21
- [B][5] : Disclosure of Investment Banker’s Conflicts and Compensation—Hammons, Del Monte, and Atheros5-21
- § 5:2.6 : Guide to Satisfying Board’s Fiduciary Duties in M&A Transactions5-23
- [A] : Introduction5-23
- [B] : Satisfying the Duties of Loyalty and Good Faith5-24
- [B][1] : In General5-24
- [B][2] : Use of Special Committees5-24
- [B][3] : The Benefit of Exculpation Under Section 102(b)(7)5-28
- [C] : Satisfying the Duty of Care5-29
- [D] : Satisfying the Duty of Disclosure5-29
- [E] : Impact of Shareholder Ratification—Gantler5-30
- [F] : Vote of Majority-of-the-Outstanding-Minority in Interested Transactions5-31
- [G] : Summary5-34
- § 5:2.7 : Do Officers Have the Same Fiduciary Duties As Directors?5-34
- § 5:2.8 : Forum Selection for Intra-Company Disputes5-35
- § 5:2.9 : Direct and Derivative Actions in Delaware5-40
- [A] : Introduction5-40
- [B] : Chancellor Strine’s Decision on the Treatment in a Merger of a Derivative Action Against a Target’s Directors—Massey5-43
- § 5:2.10 : Shareholder Access to Books and Records5-45
- § 5:3 : Directors’ Fiduciary Duties Under the ALI’s Corporate Governance Project5-46
- § 5:4 : The Role of Proxy Advisory Firms in Corporate Governance5-46
- § 5:5 : The Delaware Law Governing the Fiduciary Duties of a Target’s Directors in M&A5-47
- § 5:5.1 : Introduction5-47
- § 5:5.2 : Tender Offer Defensive Tactics—Including Introduction to Poison Pills5-47
- [A] : The Unocal Enhanced Business Judgment Standard with Unitrin Gloss5-47
- [B] : The Preferred Defensive Tactic—Poison Pills5-49
- [B][1] : Introduction5-49
- [B][2] : Adoption of a Pill5-51
- [B][3] : Board’s Redemption Right5-53
- [B][4] : Board’s Right to Amend the Pill5-53
- [B][5] : When the Pill Becomes Exercisable5-54
- [B][6] : Definition of “Acquiring Person,” “Beneficial Ownership”5-55
- [B][7] : Exception to the Definition of “Acquiring Person” for “Qualifying Tender Offer”5-58
- [B][8] : The Flip-In Right5-61
- [B][9] : The Flip-Over Right5-62
- [B][10] : Exchange Right5-65
- [B][11] : The Validity of the Poison Pill in Delaware—Moran and Hilton5-66
- [B][12] : No Dead Hand and Similar Provisions in Delaware, Quickturn, and Other States5-71
- [B][13] : Application of Unocal to the Combination of a Poison Pill and Staggered Board5-74
- [B][14] : Reaction of Proxy Advisory Firms to Poison Pills5-76
- [B][14][a] : In General5-76
- [B][14][b] : The NOL Poison Pill5-77
- [B][14][c] : The NOL Bylaw and Charter Provision5-78
- [B][15] : Triggering of Selectica’s NOL Pill5-79
- [B][15][a] : Introduction5-79
- [B][15][b] : The Chancery Court Opinion in Selectica5-84
- [B][16] : Supreme Court Opinion in Selectica5-88
- [B][17] : Adoption of a Pill with Two Different Thresholds: 20% for New Shareholders, 30% for Old Shareholders—Yucaipa5-90
- [B][18] : Adoption of a Pill by a Closely Held Corporation—eBay5-98
- [B][19] : Airgas: The Poison Pill Decision5-102
- [B][19][a] : Introduction to Airgas5-102
- [B][19][b] : The Basic Facts in Airgas5-103
- [B][19][c] : The Issue in Airgas5-105
- [B][19][d] : The Standard of Review in Airgas5-105
- [B][19][e] : A Brief Poison Pill Primer from Airgas5-107
- [B][19][f] : Note on TW Services from Airgas5-109
- [B][19][g] : Analyzing the Threat Prong of Unocal in Airgas5-109
- [B][19][h] : Analyzing the Proportionate Prong of Unocal in Airgas5-110
- [B][19][i] : Pills, Policy and Professors (and Hypotheticals) from Airgas5-111
- [B][19][j] : Chancellor Chandler’s Lament in Airgas5-111
- [B][19][k] : The Reaction to Airgas of the Pill’s Inventor, Martin Lipton5-113
- [B][19][l] : Some Early Thoughts on Airgas5-114
- [B][20] : Target’s Covenant to Adopt a Poison Pill—Compellent5-115
- [C] : “Just Saying No” Under Unocal—Moore5-116
- [D] : Other Defensive Tactics5-117
- [D][1] : White Knights and Self Tenders5-117
- [D][2] : Super-Majority Voting, Classified Boards, and Tenured Voting5-118
- [D][2][a] : In General5-118
- [D][2][b] : Removal of Directors5-120
- [D][2][c] : Tenured Voting5-122
- [D][2][d] : Airgas Issue with the Staggered Board5-123
- [D][2][e] : Addressing the Ambiguity in the Airgas Charter5-125
- [D][3] : Eliminating the Right of Shareholders to Call Special Meetings or Act by Consent5-127
- [D][4] : The Pac Man Defense5-128
- [D][5] : Actions Affecting Shareholder Voting5-128
- [D][6] : Closing the Section 13(d) Loophole5-129
- [D][7] : Golden Parachute Payments5-129
- [D][8] : Greenmail5-129
- [D][9] : Poison or Putable Debt5-129
- [D][10] : LinkedIn’s Charter Defensive Measures5-130
- [E] : The Intersection of Unocal with the Revlon Duty to “Auction” Standard5-132
- [F] : Illustration of the Limits of Revlon and the Application of Unocal—Time-Warner5-134
- [G] : Time-Warner’s Questions Regarding Cases Requiring Redemption of Poison Pills5-135
- [H] : Elaboration on Revlon: Obligation to Get the Best Price Reasonably Available Where There Is a Change of Control—QVC5-138
- [I] : Summary of Situations in Which Revlon Applies—Arnold, Lukens, NYMEX, and Smurfit-Stone5-140
- [J] : The Corporation’s Attorney-Client Privilege5-144
- [K] : The “White Knight” or Business Strategy Privilege5-147
- § 5:5.3 : Interference with Voting Rights—Blasius, Liquid Audio, and Mercier5-149
- § 5:5.4 : Arm’s-Length M&A—Including Impact of Deal Protection Devices5-153
- [A] : The Business Judgment Rule (BJR) As Applied in Van Gorkom5-153
- [B] : The Legislative Reaction to Van Gorkom—The Section 102(b)(7) Exculpation Provision5-156
- [C] : Entire Fairness Standard Applies If BJR Not Applicable—Technicolor5-159
- [D] : Determining Director Liability on a Director-by-Director Basis—Emerging Communications5-159
- [E] : The Good Faith Element of the BJR—Disney, Caremark, Stone, Sidhu, AIG, Citigroup, and Dow5-160
- [F] : The Duty to Get the Best Price Reasonably Available—Applicability of Revlon in Negotiated Mergers5-169
- [G] : Satisfying Revlon Duties with a Post-Signing Market Check—Barkan, Pennaco, and MONY5-171
- [H] : The Applicability of Revlon and Unocal to Deal Protection Devices in Arm’s-Length M&A5-173
- [H][1] : Introduction5-173
- [H][2] : No Vested Rights in Deal Protection Devices Where Revlon Applies—QVC5-174
- [H][3] : Theoretical Basis of Applying Unocal to Deal Protection Devices in Non-Revlon Cases5-175
- [H][4] : Unocal Standard Applies and No Fait Accompli with Deal Protection Devices in Non-Revlon Case—Omnicare5-176
- [H][4][a] : Background on Omnicare5-176
- [H][4][b] : The Limits of Omnicare—Orman5-179
- [H][4][c] : The Continuing Validity of Omnicare—Optima5-181
- [H][4][d] : Rejection of Omnicare in California—Monty5-181
- [H][4][e] : Vice Chancellor Nobel’s Decision Regarding Consents Given After Signing of Merger Agreement—Openlane5-183
- [H][5] : Illustration of Standard Deal Protections: No Solicit, Superior Proposal, Fiduciary Out, Matching Right, Force the Vote, and Termination Fee—MCI–Verizon Merger5-184
- [H][5][a] : Introduction5-184
- [H][5][b] : The “No Solicitation” Provision5-185
- [H][5][c] : MCI Can Provide Information to Third-Party Bidders5-186
- [H][5][d] : Negotiation with Bidder Making “Superior Proposal”5-187
- [H][5][e] : Notice to Verizon of Receipt of Any “Takeover Proposal”5-189
- [H][5][f] : Change in Shareholder Recommendation or Entering Alternative Agreement—Fiduciary Out with Matching Rights5-189
- [H][5][g] : Force the Vote5-192
- [H][5][h] : MCI’s Disclosure Obligations5-192
- [H][5][i] : Termination and Fee5-193
- [H][5][j] : No Termination Fee If “Naked No Vote”5-196
- [H][5][k] : ABA Deal Point Study—Deal Protection Devices5-197
- [H][6] : Illustrative Analysis of Standard Superior Proposal Provision, Fiduciary Out, Matching Right and Termination Fee5-197
- [H][6][a] : Deal Protection in Toys “R” Us5-197
- [H][6][b] : Deal Protection and Reverse Termination Fee in Dollar Thrifty5-200
- [H][6][c] : Measuring the Termination Fee Against Enterprise Value or Equity Value—Cogent5-205
- [H][6][d] : The Cumulative Effect of Deal Protection Provisions—Orchid5-206
- [H][7] : Go-Shops—TXU, Topps, and Lear5-208
- [H][7][a] : Introduction5-208
- [H][7][b] : The TXU Go-Shop Period5-209
- [H][7][c] : The TXU No-Shop Period5-210
- [H][7][d] : TXU Fiduciary Out for a Superior Proposal5-211
- [H][7][e] : TXU Change in Shareholder Recommendation5-213
- [H][7][f] : TXU Disclosure Obligations and Notice to Acquirer5-214
- [H][7][g] : TXU Termination Provisions5-215
- [H][7][h] : Delaware’s Approach to Go-Shops5-217
- [H][8] : “No Impairment” Covenant and Relation to Deal Protection—Energy Partners5-222
- [H][9] : Asset or Crown Jewel Options As Deal Protection Measures5-224
- [H][10] : Stock Options or Share Exchanges As Deal Protection Devices5-225
- [H][10][a] : In General5-225
- [H][10][b] : The Stock Options in J.P. Morgan–Bear Stearns and Wells Fargo–Wachovia5-225
- [H][10][c] : Courts’ Analyses of Stock Options and Other Deal Protection Devices in J.P. Morgan–Bear Stearns and Wells Fargo–Wachovia5-228
- [I] : Does the Board’s Passive Approach Satisfy Revlon?—Lyondell, Bernal, and Brown5-230
- [J] : Power of Board to Reject a Proposed Merger—TW Services5-241
- [K] : Sale of Target Where Preferred Shareholders Receive All the Consideration—Trados5-241
- [L] : The “Last Period” Problem—Steinhardt and Reis5-243
- [M] : Investment Banker’s Manipulation of the Sales Process, Stapled Financing—Del Monte5-247
- [N] : Chancellor Strine’s Opinion in El Paso5-252
- [O] : Allegation of Violation of the Duty of Loyalty and Aiding and Abetting in a Revlon Sale Transaction—Answers5-256
- § 5:5.5 : Freezeout Mergers5-258
- [A] : Introduction5-258
- [B] : General Principles—Weinberger, Lynch, and Cox5-258
- [C] : Does the Entire Fairness Standard Apply in a Tender Offer by Controlling Shareholder for the Minority Held Shares of Its Subsidiary?—Pure Resources and CNX5-263
- [D] : Vice Chancellor Laster Applies the CNX Unified Standard of Review in Wesco5-268
- § 5:5.6 : Management Buyouts5-268
- [A] : Introduction5-268
- [B] : Applicability of Entire Fairness Standard of Review Due to Breach of Duty of Loyalty—Mills5-268
- [C] : Traditional Business Judgment Rule Analysis Where Directors Are Independent—RJR Nabisco5-270
- [D] : The Impact of Revlon Duty to Auction—Barkan5-270
- [E] : Impact of Target’s Decision to Seek a Private Equity, and Not a Strategic, Buyer—Netsmart5-271
- [F] : The Procedural Defects in the Health Grades MBO5-272
- [G] : The Special Committee in the J. Crew MBO5-274
- § 5:5.7 : Issues Arising with Controlling Shareholders in M&A5-280
- [A] : Introduction5-280
- [B] : Sale by Controlling Shareholder of Its Controlling Position5-282
- [B][1] : The View of Most Courts: No Equal Opportunity Doctrine—Zetlin5-282
- [B][2] : The Minority View—Ahmanson5-282
- [B][3] : Exception for Sale of Corporate Opportunity—Perlman v. Feldmann5-283
- [B][4] : Exception for Sale of Office—Lionel and Essex5-283
- [B][5] : Exception for Sale to Known Looter—Gerdes, Keebler, Insuranshares, and Harris5-284
- [C] : Controlling Shareholder’s Responsibility in Structuring the Acquisition by a Third Party of Its Partially Owned Controlled Subsidiary—McMullin5-290
- [D] : Controlling Shareholder Receives Premium for High Vote Stock—TCI5-292
- [E] : Controlling Shareholder Attempts to Sell Its Shares Rather Than Sale of a Subsidiary of Controlled Corporation—CERBCO5-297
- [F] : Controlling Shareholder Sells Itself Rather Than Subsidiary—Digex5-298
- [G] : Use of Poison Pill to Prevent Sale of Stock of Controlled Subsidiary Held by Controlling Shareholder—Hollinger5-299
- [H] : Controlling Shareholder Rejects Sale of Target in Favor of Investment by Third Party in Target—Paxson5-300
- [I] : Controlling Shareholder Increases Its Interest to a Blocking Interest—Loral5-300
- [J] : Challenge to Controlling Shareholder’s Increase in Its Interest, Direct or Derivative—Gatz, Tri-Star, and Rossette5-303
- [K] : Sale of Valuable Subsidiary to Controlling Shareholder at a Bargain Price Followed by Resale by Shareholder at a High Price—McPadden5-304
- [L] : To Entrench Itself Board Rejects Sale of Target and Causes Target to Pursue a Recapitalization—Gantler5-306
- [L][1] : Introduction5-306
- [L][2] : Count I, Flawed Sale Process5-308
- [L][3] : Count II, Failure to Disclose All Material Information5-310
- [L][4] : Count III, Breach of Duty of Loyalty and Ratification5-311
- [M] : Controlling Shareholder Participates on the Buy Side—Hammons5-311
- [N] : Reverse Stock Splits—Reis5-315
- [O] : Controlling Shareholder/Creditor Increases Equity Position in a Recapitalization—Hallmark5-318
- [P] : Controlling Shareholder Causes Controlled Corporation to Acquire in Exchange for Its Stock the Stock of a Sister Controlled Corporation—Southern Peru5-319
- § 5:5.8 : Summary of Current Delaware Law Governance Rules for M&A5-319
- § 5:5.9 : “Directors” Duties in the “Zone of Insolvency”5-321
- § 5:5.10 : The Uncertainty in Delaware M&A Law5-326
- [A] : General Principles5-326
- [B] : Uncertain Deference to Independent and Disinterested Directors—Caremark, Netsmart, Topps, and Lear5-327
- § 5:6 : ALI Rules Governing Fiduciary Duties of Target’s Directors in M&A5-329
- § 5:6.1 : Introduction5-329
- § 5:6.2 : Arm’s-Length M&A5-329
- § 5:6.3 : Management Buyouts5-330
- § 5:6.4 : Defensive Tactics in Tender Offers5-331
- § 5:6.5 : Freezeouts5-332
- § 5:6.6 : Summary of ALI Governance Rules for M&A5-333
- § 5:6.7 : Comments on ALI Approach5-335
- § 5:7 : Delaware Law Governing Fiduciary Duties of Acquirer’s Directors in M&A5-335
- § 5:8 : ALI Rules Governing the Fiduciary Duties of an Acquirer’s Directors in M&A5-338
- Appendix 5A : MCI’s Poison PillApp. 5A-1
- Appendix 5B : MCI–Verizon Deal Protection DevicesApp. 5B-1
- Appendix 5C : TXU LBO, Go-Shop; Break-Up and Reverse Break-Up Fees; Financing; Regulatory ApprovalsApp. 5C-1
- Appendix 5D : LinkedIn’s Certificate of Incorporation, Bylaws, and S-1 Discussion of Capital Stock and Anti-Takeover ProvisionsApp. 5D-1
- Appendix 5E : Guide to Directors’ Fiduciary Duties in M&A TransactionsApp. 5E-1
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Chapter 6: |
Introduction to the ‘33 and ‘34 Acts and Exemptions in Acquisitions of Closely Held Targets; And Appendices 6A-6H |
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- § 6:1 : Scope6-7
- § 6:2 : Applicability of ‘33 and ‘34 Acts to “Securities” and in Mergers and Acquisitions6-10
- § 6:3 : Materiality Under the ‘33 and ‘34 Acts6-12
- § 6:3.1 : Introduction6-12
- § 6:3.2 : Materiality Under Rule 14a-9 of the ‘34 Act6-12
- § 6:3.3 : Materiality Under Rule 10b-5 of the ‘34 Act6-13
- § 6:3.4 : Materiality Under the ‘33 Act6-15
- § 6:3.5 : Materiality in Financial Statements6-15
- § 6:3.6 : Illustration of Materiality Under Rules 10b-5 and 14a-9—The DaimlerChrysler Merger of Equals6-16
- § 6:3.7 : Materiality in BOA–Merrill: The Role of the Lawyers6-18
- § 6:4 : Introduction to the Liability Provisions of the ‘33 Act and ‘34 Act6-21
- § 6:4.1 : In General6-21
- § 6:4.2 : Section 12(a)(1) of the ‘33 Act6-21
- § 6:4.3 : Section 11 of the ‘33 Act6-22
- [A] : Introduction6-22
- [B] : The Due Diligence and Reliance Defenses6-24
- [B][1] : In General6-24
- [B][2] : Due Diligence and Reliance Defenses of Underwriters6-26
- [B][3] : Due Diligence and Reliance Defenses of Directors6-33
- § 6:4.4 : Section 12(a)(2) Under the ‘33 Act6-34
- [A] : In General6-34
- [B] : Inapplicability of Section 12(a)(2) to Non-Public Offerings6-36
- § 6:4.5 : Rule 10b-5 Under the ‘34 Act6-37
- [A] : Introduction6-37
- [B] : Rule 10b-5 in Freeze-Out Mergers6-40
- [C] : Trading on Non-Public Information Regarding Mergers and Acquisitions—Misappropriation Theory Under Rule 10b-5—Sokol6-41
- [D] : Impact of Rule 10b-5 on Disclosure of Merger Negotiations6-45
- [D][1] : Authorities Dealing with Denial of Merger Negotiations That Are in Fact Taking Place6-45
- [D][2] : Authorities Addressing When Merger Negotiations Must Be Included in Disclosure Documents6-50
- [E] : Impact of Rule 10b-5 Upon the Purchase of Stock of a Closely Held Corporation by the Corporation or a Controlling Shareholder6-53
- § 6:4.6 : Rule 14a-9 Under the ‘34 Act6-55
- [A] : In General6-55
- [B] : Is Scienter Required in an Action Under Rule 14a-9?6-57
- [C] : The “Essential Link” Requirement in a Rule 14a-9 Action6-58
- [D] : Is Evil Intent Without a Material Misrepresentation Actionable Under Rule 14a-9?6-61
- § 6:4.7 : Rule 9(b) and PSLRA Pleading Standards6-61
- § 6:5 : Introduction to the Registration Requirements Under Section 5 of the Securities Act of 1933 As Amended by the 2005 Securities Offering Reforms6-72
- § 6:5.1 : In General6-72
- § 6:5.2 : Types of Underwritings6-73
- § 6:5.3 : Introduction to the SEC’s 2005 Securities Offering Reform Rules6-75
- § 6:5.4 : Introduction to the Registration Requirement of Section 56-77
- [A] : Introduction6-77
- [B] : The Pre-Filing Period6-77
- [B][1] : General Principles and Rule 1356-77
- [B][2] : The Thirty-Day Bright-Line Exemption for All Issuers in Rule 163A Adopted by the 2005 Securities Offering Reform6-79
- [B][3] : The Factual Information Exemption for Non-Reporting Issuers in Rule 169 Adopted by the 2005 Securities Offering Reform6-80
- [B][4] : The Factual Business Information and Forward-Looking Statement Exemption for Reporting Issuers in Rule 168 Adopted by the 2005 Securities Offering Reform6-81
- [B][5] : The Unrestricted Exemption for WKSIs in Rule 163 Adopted by the 2005 Securities Offering Reform6-83
- [C] : Waiting Period6-86
- [C][1] : Introduction6-86
- [C][2] : Changes to the Waiting Period Rules Adopted in the 2005 Securities Offering Reform6-88
- [C][2][a] : Rule 134 As Amended by the 2005 Securities Offering Reform6-88
- [C][2][b] : Use of Free Writing Prospectuses During the Waiting Period Under Rules 164 and 433, Adopted by the 2005 Securities Offering Reform6-92
- [C][2][b][i] : Introduction6-92
- [C][2][b][ii] : What Type of Information About the Offering May Be Included in a Free Writing Prospectus6-95
- [C][2][b][iii] : The Seasoned Issuer and WKSI Class; IPO Issuer and Unseasoned Issuer Class6-95
- [C][2][b][iv] : Conditions Applicable to the IPO Issuer and Unseasoned Issuer Class6-96
- [C][2][b][v] : Conditions Applicable to the Seasoned Issuer and WKSI Class6-98
- [C][2][b][vi] : Conditions Applicable to Road Shows of Both the IPO Issuer and Unseasoned Issuer Class and the Seasoned Issuer and WKSI Class6-99
- [C][2][b][vii] : Treatment of Information on or Hyperlinked from the Issuer’s Website6-103
- [D] : The Post-Effective Period6-104
- [D][1] : Introduction and Use of Rule 430A to Go Effective6-104
- [D][2] : Changes Made by the 2005 Securities Offering Reform Regarding Completion of Sales: Access Equals Delivery6-106
- [E] : Summary of the Operation of the Three Periods Governed by Section 56-110
- [F] : The JOBS Act: An Introduction and Applicability to Registered Offerings6-111
- [G] : Attempting to Avoid Section 5 Through Reverse Mergers and Similar Transactions6-112
- § 6:6 : Compliance with State Law6-114
- § 6:7 : Introduction to Registration Statements on Forms S-1 and S-36-114
- § 6:7.1 : In General6-114
- § 6:7.2 : The Interface Between Forms S-1 and S-3 and Regulations S-K and S-X6-115
- § 6:7.3 : Requirement for Additional Disclosures If Material: Rule 408(a) and Rule 12b-206-117
- § 6:7.4 : Presentation of Information in a Registration Statement6-117
- § 6:7.5 : The “Plain English” Requirement6-118
- § 6:8 : Preparation of the S-1 Registration Statement for an IPO—The EverCore IPO6-119
- § 6:8.1 : Introduction6-119
- § 6:8.2 : The Delaying Amendment to the Registration Statement6-119
- § 6:8.3 : S-1, Item 1, Forepart of the Registration Statement and Outside Front Cover Page of Prospectus, Reg. S-K, Item 5016-120
- § 6:8.4 : S-1, Item 2, Inside Front and Outside Back Cover Pages of Prospectus, Reg. S-K, Item 5026-120
- § 6:8.5 : Rule 408 Additional Disclosure: Prospectus Only Source of Information6-121
- § 6:8.6 : Terms Used in the Prospectus6-121
- § 6:8.7 : S-1, Item 3, Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges, Reg. S-K, Item 5036-121
- § 6:8.8 : Reliance on the Bespeaks Caution Doctrine for Forward-Looking Information6-121
- § 6:8.9 : Rule 408 Additional Disclosure: Organizational Structure6-124
- § 6:8.10 : S-1, Item 4, Use of Proceeds, Reg. S-K, Item 5046-125
- § 6:8.11 : S-1, Item 5, Determination of Offering Price, Reg. S-K, Item 5066-125
- § 6:8.12 : S-1, Item 6, Dilution, Reg. S-K, Item 5066-125
- § 6:8.13 : S-1, Item 7, Selling Shareholders, Reg. S-K, Item 5076-125
- § 6:8.14 : S-1, Item 8, Plan of Distribution, Reg. S-K, Item 5086-126
- § 6:8.15 : S-1, Item 9, Description of Securities to Be Registered, Reg. S-K, Item 2026-126
- § 6:8.16 : S-1, Item 10, Interest of Named Experts and Counsel, Reg. S-K, Item 5096-126
- § 6:8.17 : S-1, Item 11(a), Description of Business, Reg. S-K, Item 1016-126
- § 6:8.18 : S-1, Item 11(b), Description of Property, Reg. S-K, Item 1026-126
- § 6:8.19 : S-1, Item 11(c), Legal Proceedings, Reg. S-K, Item 1036-126
- § 6:8.20 : S-1, Item 11(d), Market Price, Dividends and Related Matters, Reg. S-K, Item 2016-126
- § 6:8.21 : S-1, Item 11(e), Financial Statements Required by Reg. S-X, Including the Pro Forma Financial Statements Required by Article 11 of Reg. S-K6-126
- § 6:8.22 : S-1, Item 11(f), Selected Financial Data, Reg. S-K, Item 3016-127
- § 6:8.23 : S-1, Item 11(g), Supplementary Financial Information, Reg. S-K, Item 3026-127
- § 6:8.24 : S-1, Item 11(h), Management Discussion and Analysis, Reg. S-K, Item 3036-127
- [A] : Introduction6-127
- [B] : Determining if the Issuer Has Complied with the MD&A Disclosure—Blackstone6-128
- § 6:8.25 : S-1, Item 11(i), Disagreements with Accountants, Reg. S-K, Item 3046-130
- § 6:8.26 : S-1, Item 11(j), Qualitative and Quantitative Disclosure About Market Risk, Reg. S-K, Item 3056-130
- § 6:8.27 : S-1, Item 11(k), Directors and Executive Officers, Reg. S-K, Item 4016-130
- § 6:8.28 : S-1, Item 11(l), Executive Compensation and Compensation Committee Interlocks, Reg. S-K, Items 402 and 407(e)(4)6-130
- § 6:8.29 : S-1, Item 11(m), Security Ownership of Certain Beneficial Owners and Management, Reg. S-K, Item 4036-131
- § 6:8.30 : S-1, Item 11(n), Transactions with Related Persons, Reg. S-K, Item 4046-131
- § 6:8.31 : S-1, Item 11(n), Corporate Governance, Reg. S-K, Item 407(a)6-131
- § 6:8.32 : Rule 408 Additional Disclosure6-131
- [A] : In General6-131
- [B] : Capitalization Table6-131
- [C] : Material Federal Income Taxes6-132
- § 6:8.33 : Information Not Required in Prospectus6-132
- § 6:9 : Special Purpose Acquisition Companies and Rule 4196-132
- § 6:10 : Reporting Requirements of a ‘34 Act Company6-135
- § 6:10.1 : Introduction6-135
- § 6:10.2 : The Form 10-K Annual Report6-136
- [A] : Introduction6-136
- [B] : Form 10-K, Item 9A, Controls and Procedures; Regulation S-K, Item 307, Disclosure Controls and Procedures, and Item 308, Internal Control Over Financial Reporting6-138
- [B][1] : Introduction6-138
- [B][2] : The SOX Origin of Internal Controls, Disclosure Controls and Officer Certification6-138
- [B][2][a] : Introduction6-138
- [B][2][b] : Management Assessment of Internal Controls6-138
- [B][2][b][i] : In General6-138
- [B][2][b][ii] : Applicability of Internal Controls Report Regarding a Newly Acquired Target6-139
- [B][2][c] : Disclosure Controls and Procedures6-140
- [B][2][d] : Illustration of Representation and Warranty in an Acquisition Agreement Concerning Internal Controls and Disclosure Controls6-141
- [B][2][e] : Officer Certification of Financial Reports: Including Internal Controls and Disclosure Controls6-142
- [B][2][f] : Officer’s Certification Under Section 906 of SOX, Section 1350 of Title 18, U.S.C.6-146
- [B][3] : Disclosure Controls Under Item 307 of Regulation S-K6-147
- [B][4] : Internal Controls and Accountant’s Attestation Under Item 308 of Reg. S-K6-147
- [C] : Form 10-K, Item 10, Corporate Governance; Regulation S-K, Item 406, Code of Ethics, Item 407(d)(4), Audit Committee, and Item 407(d)(5), Audit Committee Financial Expert6-147
- [C][1] : Reg. S-K, Item 406, Code of Ethics6-147
- [C][2] : Reg. S-K, Item 407(d)(4), Standing Audit Committee6-148
- [C][3] : Reg. S-K, Item 407(d)(5), Audit Committee Financial Expert6-149
- [D] : Form 10-K, Item 13, Director Independence, Regulation S-K, Item 407(a)6-150
- § 6:10.3 : The Form 10-Q Quarterly Report6-150
- § 6:10.4 : The Form 8-K Periodic Report6-151
- [A] : In General6-151
- [B] : The Non-Disclosure of Conditions and Other Provisions of Public Company Acquisition Agreements6-153
- § 6:10.5 : The Annual Proxy Statement6-155
- [A] : In General6-155
- [B] : Final Dodd-Frank Say on Pay and Golden Parachute Rules6-156
- [B][1] : The Dodd-Frank Provisions on Say on Pay and Golden Parachutes6-156
- [B][2] : Introduction to the SEC’s Final Say on Pay Rules6-158
- [B][3] : Introduction to the SEC’s Final Golden Parachute Rules6-159
- § 6:10.6 : The Annual Report to Shareholders6-161
- § 6:10.7 : 2010 Financial Reform Act Impact on Proxy System6-162
- § 6:10.8 : Other Proxy Initiatives6-163
- § 6:10.9 : The JOBS Act and the ‘34 Act Reporting Requirements for Emerging Growth Companies6-164
- § 6:11 : Preparation of a Registration Statement on Form S-36-165
- § 6:11.1 : Introduction6-165
- § 6:11.2 : Shelf Registrations Under Rule 4156-166
- [A] : Introduction6-166
- [B] : Impact of 2005 Securities Offering Reform: The Automatic Shelf Registration for WKSIs6-166
- [C] : Illustration of an Automatic Shelf Registration Offering, IBM’s Note Offering in October 20086-167
- § 6:12 : Introduction to Section 16 and Its Role in Acquisition Transactions6-168
- § 6:12.1 : Section 16(a) Ownership Reports6-168
- § 6:12.2 : Section 16(b) Strict Liability6-169
- [A] : Introduction6-169
- [B] : Regulatory Exemptions Under Section 16(b)6-170
- [C] : The Exemption in Rule 16b-3(d) by the Acquirer6-173
- [C][1] : In General6-173
- [C][2] : Illustration of the Use of Rule 16b-3(d) in the Sirius–XM Transaction6-174
- [D] : The Exemption in Rule 16b-3(e) by the Target6-175
- [E] : Rule 16b-7 Exemption for Certain Mergers That Are Continuations6-177
- [F] : Judicially Developed Exemption for Unorthodox Transactions6-177
- § 6:13 : Exemptions from ‘33 Act Registration6-178
- § 6:13.1 : Introduction6-178
- § 6:13.2 : The JOBS Act, $50 Million and Crowdfunding Exemptions6-180
- § 6:14 : Guide for Completing a Statutory Section 4(2) Private Placement6-181
- § 6:15 : Rule 506 of Reg. D—Exemptions for Transactions Involving Limited Offers and Sales6-184
- § 6:15.1 : Introduction6-184
- § 6:15.2 : The Concept of “Accredited Investor”6-185
- [A] : In General6-185
- [B] : Impact of Dodd-Frank Act on Definition of Accredited Investor6-186
- [C] : SEC Revision of the Definition of Accredited Investor6-186
- § 6:15.3 : Rule 502 Conditions6-187
- [A] : Introduction6-187
- [B] : Integration6-187
- [C] : Information6-188
- [D] : Limitation on the Manner of the Offering6-190
- [D][1] : The General Prohibition Against Advertising in Rule 502(c)6-190
- [D][2] : Goldman’s Facebook Private Offering6-191
- [D][3] : JOBS Act Relaxation of General Solicitation Ban6-191
- [E] : Limitation of Resale6-192
- § 6:15.4 : Specific Conditions Under Rule 506(b)(2)6-193
- [A] : Introduction6-193
- [B] : Restriction on the Number of Purchasers6-193
- [C] : Nature of the Purchasers6-194
- § 6:15.5 : General Observations on the Use of Rule 5066-195
- [A] : Overlap with the Statutory 4(2) Exemption6-195
- [B] : Procedural Matters6-195
- § 6:16 : Resale of Restricted Securities Under Rule 1446-195
- § 6:16.1 : Introduction6-195
- § 6:16.2 : Sales by Non-Affiliates of Reporting Companies: Public Acquirer Acquires Closely Held Target6-197
- § 6:16.3 : Sales by Non-Affiliates of Non-Reporting Companies: Closely Held Acquirer Acquires Closely Held Target6-198
- § 6:16.4 : Sales by Affiliates: Target Shareholder Becomes Affiliate of the Acquirer6-199
- § 6:16.5 : Negotiation for a Registration Rights Agreement6-201
- § 6:17 : Resale of Restricted Securities Under Section 4(1½)6-201
- § 6:18 : Introduction to Rule 144A6-204
- § 6:19 : The Exxon Capital A/B Exchange Offering6-205
- Appendix 6A : Evercore IPO DocumentsApp. 6A-1
- Appendix 6B : Evercore Form 10-K, for Year Ended December 31, 2007App. 6B-1
- Appendix 6C : Evercore Free Writing Prospectus, May 15, 2007App. 6C-1
- Appendix 6D : Oracle Annual Proxy Statement for 2008App. 6D-1
- Appendix 6E : IBM Note Offering on Automatic Shelf Registration Statement, October 2008App. 6E-1
- Appendix 6F : Morgan Stanley–Mitsubishi Registration Rights AgreementApp. 6F-1
- Appendix 6G : Citadel Private Offering Circular for a Rule 144A OfferingApp. 6G-1
- Appendix 6H : Sapphire Industrials Corp., a SPACApp. 6H-1
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Chapter 7: |
Impact in Negotiated Public Company M&A of the ‘33 and ‘34 Acts; And Appendices 7A-7F |
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- § 7:1 : Scope7-2
- § 7:2 : Practical Considerations in Negotiated Public Company Mergers7-4
- § 7:2.1 : Introduction7-4
- § 7:2.2 : Acquirer’s Perspective7-4
- § 7:2.3 : Target’s Perspective7-5
- § 7:3 : Discussion of Merger Negotiations: Impact of Rule 10b-57-5
- § 7:4 : Announcing the Consummation of a Merger Agreement: Form 8-K7-5
- § 7:5 : Impact of ‘33 and ‘34 Acts in Cash and Stock Business Combinations7-7
- § 7:5.1 : Basic Principles Under Rule 1457-7
- [A] : Rule 145(a) and (b), Business Combinations As Sales and Communications7-7
- [B] : The Presumptive Underwriter Provisions of Rule 145(c) and (d)7-9
- § 7:5.2 : Basic Principles Under the ‘34 Act Proxy Rules7-12
- § 7:5.3 : SEC’s Summary of the Regulatory Structure for Business Combinations and Tender Offers7-13
- § 7:6 : 1999 M&A Release: Relaxation of the M&A Gun Jumping Rules Under (1) Section 5(c) of the ‘33 Act, and (2) the Proxy Rules Under the ‘34 Act7-16
- § 7:6.1 : Traditional Gun Jumping Under Section 5(c) in M&A Transactions7-16
- § 7:6.2 : Traditional Gun Jumping Under the Proxy Rules in M&A Transactions7-17
- § 7:6.3 : Impact of Rules 165 and 14a-12 on Pre-Filing Communications Regarding M&A Transactions7-17
- [A] : Rule 1657-17
- [B] : Rule 14a-127-21
- § 7:7 : Overview of Regulation M-A Adopted by the 1999 M&A Release7-23
- § 7:8 : Overview of Proxy Rules in Arm’s-Length Mergers7-24
- § 7:9 : Overview of Schedule 14A in Arm’s-Length Mergers7-30
- § 7:9.1 : In General7-30
- § 7:9.2 : Unbundling of Merger Related Proxy Proposals7-31
- § 7:10 : Overview of the Use of Form S-4 in Arm’s-Length Mergers7-32
- § 7:11 : Overview of the Use of Schedule 14C in Certain Acquisitions and Distributions7-36
- § 7:12 : Drafting a Form S-4 for a Stock Merger and a Schedule 14A Proxy Statement for a Cash Merger: A Comparison7-36
- § 7:12.1 : Introduction7-36
- § 7:12.2 : Comparison of Provisions of the S-4 for the Sirius–XM Stock Merger with the Schedule 14A for the Toys Cash Merger7-37
- § 7:13 : Treatment Under the ‘33 Act of Agreements Pursuant to Which Certain Target Shareholders Agree to Vote Their Shares for a Proposed Merger—Lock-Ups7-50
- § 7:14 : Restrictions on Market Activity in Connection with a Merger: Regulation M and Rule 10b-187-50
- § 7:14.1 : Introduction7-50
- § 7:14.2 : Regulation M7-51
- § 7:14.3 : Rule 10b-187-55
- § 7:15 : The JOBS Act and M&A7-59
- Appendix 7A : Sirius Form 8-K Reporting Merger with XMApp. 7A-1
- Appendix 7B : Sirius–XM Rule 165 Investor PresentationApp. 7B-1
- Appendix 7C : Sirius Prospectus and Sirius and XM Joint Proxy Statements, October 2, 2007App. 7C-1
- Appendix 7D : Toys Rule 14a-12 Statement on Form 8-K Reporting MergerApp. 7D-1
- Appendix 7E : Toys Reverse Subsidiary Cash Merger Proxy Statement Schedule 14A for a Cash MergerApp. 7E-1
- Appendix 7F : SEC Comment Letter on Sirius Prospectus and Sirius and XM Joint Proxy StatementsApp. 7F-1
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Chapter 8: |
Tender Offers, Open Market Purchases, and Going Private Transactions; And Appendices 8A-8J |
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- § 8:1 : Scope8-7
- § 8:2 : Issues Before Initiating a Hostile Tender Offer8-9
- § 8:2.1 : In General8-9
- § 8:2.2 : Strategic Rationale for the Acquisition8-9
- § 8:2.3 : Special Due Diligence Issues8-9
- § 8:2.4 : Financing the Acquisition8-10
- § 8:2.5 : Assessing Acquirer’s Vulnerability to Counterattack or Third-Party Attack8-10
- § 8:2.6 : Establishing a “Toehold” in the Target’s Shares8-11
- § 8:2.7 : Before It All Begins: The “Bear Hug”—Microsoft–Yahoo!8-12
- § 8:2.8 : Planning for a Possible Proxy Contest to Unseat the Target’s Board8-13
- § 8:2.9 : Planning for the Second-Step Merger8-13
- § 8:3 : Introduction to the Williams Act8-14
- § 8:3.1 : In General8-14
- § 8:3.2 : General Applicability of Sections 13(d) and (e), and Sections 14(d) and (e)8-14
- § 8:3.3 : Purposes of Sections 13(d) and (e), and 14(d) and (e)8-15
- § 8:4 : Regulation of Open Market Purchases Under Section 13(d)8-20
- § 8:4.1 : Scope8-20
- § 8:4.2 : The Filing Requirement in Section 13(d)(1)8-21
- § 8:4.3 : Interface Between the 5% Limit, the Ten-Day Window, the Hart-Scott-Rodino Act, and Poison Pills8-22
- § 8:4.4 : Standing and Remedies Under Section 13(d)8-24
- § 8:4.5 : Applicability of Section 13(d) to Groups8-26
- § 8:4.6 : Determination of Beneficial Ownership8-29
- [A] : In General8-29
- [B] : The CSX Decision8-31
- [B][1] : The U.S. District Court’s Decision in CSX8-31
- [B][2] : Second Circuit’s Written Opinion in CSX8-38
- [C] : The Private Ordering in Response to CSX: Changing Definition of Beneficial Ownership in Poison Pills and Advance Notice By-Laws8-39
- [D] : Approach of the U.K.’s Financial Services Authority to Derivative Disclosures8-39
- [E] : 2010 Amendments to Section 13 Relating to Security-Based Swaps8-40
- [F] : SEC Review of the Section 13(d) Beneficial Ownership Rules8-44
- § 8:4.7 : The Information Required in Schedule 13D8-45
- § 8:4.8 : Material Changes and the Prompt Filing Requirement8-48
- § 8:4.9 : Brief Introduction to Schedules 13G and 13F—Perry8-50
- [A] : In General8-50
- [B] : Perry8-53
- § 8:5 : The Meaning of the Term “Tender Offer”8-55
- § 8:5.1 : Scope8-55
- § 8:5.2 : Definition of Tender Offer: The Case Law8-55
- [A] : Organized Solicitation, the Wellman Factors8-55
- [B] : Open Market Purchases—Carter Hawley8-56
- [C] : Purchase After Termination of Tender Offer—Hanson Trust and the SEC’s Response to Market Sweeps8-57
- § 8:5.3 : SEC’s Proposed (and Withdrawn) Definition of Tender Offer8-59
- § 8:5.4 : Discussion of SEC’s Position on Definition of “Tender Offer” in 1999 M&A Release8-60
- § 8:6 : State Regulation of Tender Offers8-60
- § 8:6.1 : Scope8-60
- § 8:6.2 : The First Generation Statutes: The Supreme Court’s View of the Illinois Statute—MITE8-61
- § 8:6.3 : The Second Generation Statutes: The Supreme Court’s View of the Indiana Control Share Statute—CTS8-62
- § 8:6.4 : Third Generation Business Combination Statutes—Amanda8-65
- § 8:6.5 : Section 203 of the Delaware General Corporation Law8-67
- [A] : The General Rules8-67
- [A][1] : Constitutionality8-67
- [A][2] : Corporations Subject to Section 2038-67
- [A][3] : The Three-Year Moratorium on Mergers8-68
- [A][4] : The “Interested Stockholder” and Ownership Concept8-68
- [A][5] : The Business Combination8-71
- [A][6] : The Board Approval, the 85%, and the 66-2/3% Exceptions8-71
- [A][6][a] : The Board Approval Exception—Digex8-71
- [A][6][b] : The 85% Exception8-72
- [A][6][c] : The 66-2/3% Exception8-73
- [B] : Dealing with Section 203 and Other Possible Baby Williams Acts in Tender Offers—The Oracle Tender Offer for PeopleSoft8-73
- [B][1] : Introduction8-73
- [B][2] : Why the Acquirer Will Unlikely Be Willing to Live with a Three-Year Moratorium8-74
- [B][3] : The Oracle Tender Offer for PeopleSoft8-74
- § 8:7 : Third-Party Tender Offers8-77
- § 8:7.1 : Scope8-77
- § 8:7.2 : Practical Aspects of Tender Offers: The Parties Involved8-77
- [A] : Introduction8-77
- [B] : Specialized Professionals on the Acquirer’s Side8-78
- [B][1] : Acquirer’s Dealer Manager8-78
- [B][2] : Acquirer’s Information Agent8-78
- [B][3] : Acquirer’s Depositary or Exchange Agent and the Tender Documents8-79
- § 8:7.3 : Sections 14(d) and (e) and the Substantive Rules Affecting the Bidder8-80
- [A] : Introduction to Section 14(d)8-80
- [B] : Introduction to Section 14(e)8-80
- [B][1] : In General8-80
- [B][2] : Applicability of Section 14(e) to Non-Conventional and Non-Public Tender Offers8-85
- [C] : Transactions Covered, Section 14(d)(1)8-87
- [D] : What Is “Beneficial Ownership”?8-88
- [E] : Who Is the Bidder?8-88
- [F] : Information Required, Section 14(d)(1)8-89
- [G] : The Group Concept, Section 14(d)(2)8-90
- [H] : Substantive Provisions of Tender Offers in the Statute and Rules8-90
- [H][1] : Twenty Business Days and Other Time Requirements, Rule 14e-18-90
- [H][2] : Extending the Twenty-Business-Day Period8-91
- [H][3] : Subsequent Offering Period, Rule 14d-118-92
- [H][4] : Withdrawal Rights, Section 14(d)(5) and Rule 14d-78-93
- [H][5] : Pro-Rata Purchases, Section 14(d)(6) and Rule 14d-88-93
- [H][6] : “All Holders, Best Price Rule,” Section 14(d)(7) and Rule 14d-108-94
- [H][6][a] : In General8-94
- [H][6][b] : Integration of Separate Tender Offers—Trump8-95
- [H][6][c] : Integration of Side Deal into the Tender Offer—Epstein8-97
- [H][6][d] : The Bright Line Rule—Lerro8-99
- [H][6][e] : The Amended Rule 14d-108-100
- [H][7] : Prohibition Against Purchases Outside the Tender Offer, Rule 14e-58-102
- [H][8] : Prompt Payment or Return of Securities, Rule 14e-1(c)8-104
- [I] : Conditions to a Tender Offer8-104
- § 8:7.4 : Bidder’s Pre-Commencement Communications8-106
- § 8:7.5 : Bidder’s Commencement of a Tender Offer8-107
- [A] : Why “Commencement” Matters8-107
- [B] : The Commencement Rules8-108
- § 8:7.6 : Bidder’s Filing and Transmission Requirements, Rule 14d-38-109
- [A] : In General8-109
- [B] : Material Changes8-109
- § 8:7.7 : Bidder’s Dissemination Requirements, Rule 14d-48-110
- [A] : In General8-110
- [B] : All Cash Tender Offer8-110
- [C] : Exchange Offers8-111
- [C][1] : General Principles8-111
- [C][2] : Impact of Material Changes on Exchange Offer8-113
- § 8:7.8 : Bidder’s Distribution of Tender Offer Materials to Target’s Shareholders, Rule 14d-58-114
- § 8:7.9 : Bidder’s Disclosure of Tender Offer Information to Target’s Stockholders, Rule 14d-68-116
- [A] : In General8-116
- [B] : Summary Advertisement8-117
- [C] : Offer to Purchase8-118
- [D] : Schedule TO8-118
- § 8:7.10 : Target’s Solicitations and Recommendations, Section 14(d)(4) and Rules 14d-9 and 14e-28-121
- [A] : General Principles8-121
- [B] : Rules 14e-2 and 14d-98-122
- [C] : Rule 14d-98-122
- [C][1] : Applicability8-122
- [C][2] : Stop, Look, and Listen Statements8-122
- [C][3] : Pre-Commencement Communications8-123
- [C][4] : Post-Commencement Communications8-124
- [C][5] : The Schedule 14D-9 and Recommendation to Shareholders8-124
- [C][6] : Material Changes in the Schedule 14D-9—Kern8-125
- § 8:7.11 : Purchases by a Target During a Third-Party Tender Offer, Rules 13(e)(1) and 10b-188-126
- § 8:7.12 : Trading on the Basis of Material Non-Public Information in the Context of Tender Offers, Rule 14e-38-127
- § 8:7.13 : Prohibition Against Short and Hedged Tendering, Rule 14e-48-129
- § 8:7.14 : Stock Exchange Rules Regarding Tender Offers8-129
- § 8:8 : Negotiated Tender Offers and Second-Step Mergers with “Top-Up” Options8-131
- § 8:9 : Issuer Tender Offers8-132
- § 8:10 : Going Private Transactions, Rule 13e-38-133
- § 8:10.1 : Scope8-133
- § 8:10.2 : Definition of Affiliate, Rule 13e-3(a)(1)8-134
- § 8:10.3 : Transactions Covered, Rule 13e-3(a)(3)8-134
- [A] : In General8-134
- [B] : Determining If Management of the Target Causes Acquirer to Be an Affiliate of the Target8-135
- [C] : Exception for Two-Step, Tender Offer Followed by Merger8-138
- [D] : Other Exceptions8-139
- § 8:10.4 : The Antifraud Provision for Rule 13e-3 Transactions, Rule 13e-3(b) and (c)8-139
- § 8:10.5 : Material Required to Be Filed, Schedule 13E-3, Rule 13e-3(d)8-140
- [A] : In General8-140
- [B] : Treatment of Investment Bankers’ Valuation Reports8-142
- § 8:10.6 : Disclosure of Information to Shareholders, Rule 13e-3(e)8-144
- § 8:10.7 : Dissemination of Information to Shareholders, Rule 13e-3(f)8-144
- § 8:11 : Introduction to Use of a Proxy Contest to Unseat a Target’s Recalcitrant Board8-145
- § 8:11.1 : The Issue8-145
- § 8:11.2 : State Corporate Law Issues Regarding Proxy Contests8-146
- [A] : Potential Conflicts of Proposed Replacement Directors8-146
- [B] : Understanding the Voting Machinery at the Target Corporation8-147
- [B][1] : Introduction8-147
- [B][2] : Quorums, Required Vote8-148
- [B][3] : Plurality or Majority Voting for Directors8-148
- [B][4] : The Ability of Stockholders to Act by Consent8-150
- [B][5] : Special Meetings8-151
- [B][6] : The Annual Meeting8-151
- [B][7] : The Advance Notice By-Law8-152
- [B][7][a] : In General8-152
- [B][7][b] : Illustration of an Advance Notice By-Law, with Derivative Disclosure Element—Biogen and LinkedIn8-154
- [B][8] : Requests for Stockholder Lists and Inspection of Books and Records8-156
- [B][9] : Challenge to Contested Elections and Vote Buying—Hewlett-Packard, Portnoy, and Kurz8-157
- [B][10] : Reimbursement of Proxy Expenses8-160
- [B][11] : 2009 Amendments to the DGCL Relating to Proxy Access8-161
- [B][12] : Dealing with Shareholder Proposals—CA I and CA II8-161
- [B][12][a] : In General8-161
- [B][12][b] : CA I, Proposed Unanimous Vote to Adopt Poison Pill8-162
- [B][12][c] : CA II, Proposed Mandatory Reimbursement of Proxy Expenses8-162
- [B][12][d] : 2009 Amendments to DGCL Regarding Proxy Expenses8-166
- [B][13] : Reduction in the Number of Directors—Kurz8-167
- § 8:11.3 : Summary of the Federal Proxy Rules Relating to Proxy Contests8-168
- [A] : Introduction8-168
- [B] : Solicitations by the Acquirer and Others Before Providing a Proxy Statement, Rule 14a-128-168
- [B][1] : Rule 14a-12(a), Conditions to Solicitations Before a Proxy Statement Is Filed8-168
- [B][2] : Rule 14a-12(c), Additional Conditions for Contested Elections of Directors8-169
- [B][3] : Instruction 2, Communications After Definitive Proxy Statement Is on File8-172
- [C] : Filing of the Acquirer’s Preliminary Proxy Statement, Rule 14a-68-172
- [D] : Mailing of the Acquirer’s Proxy Statement and Other Materials, Rule 14a-78-172
- [E] : Solicitations by Acquirer or Target After Providing a Definitive Proxy Statement, Fight Letters, Rule 14a-6(b)8-172
- [F] : Personal Solicitation Material, Rule 14a-6(c)8-173
- [G] : Proxy Contest for a Short Slate, Rule 14a-4(d)8-174
- [H] : Exemptions and Exceptions to the Solicitation Concept8-176
- [H][1] : Speeches and Similar Communications by Acquirer After Providing Definitive Proxy Statement, Rule 14a-3(f)8-176
- [H][2] : Mere Announcement by Non-Parties to the Transaction Is Not a “Solicitation,” Rule 14a-1(l)(2)(iv)8-176
- [H][3] : Exempt Solicitations by Non-Parties Under Rule 14a-2(b)(1)8-176
- [H][4] : Solicitation of No More Than Ten, Rule 14a-2(b)(2)8-176
- [H][5] : Furnishing of Proxy Voting Advice in the Ordinary Course, Rule 14a-2(b)(3)8-177
- [H][6] : Publication of Research Reports by Broker-Dealers, Rule 14a-2(b)(5)8-177
- [H][7] : Solicitations in Electronic Shareholder Forums, Rule 14a-2(b)(6)8-177
- [I] : SEC’s Final Proxy Access Rule8-177
- [I][1] : Introduction8-177
- [I][2] : Impact of the Dodd-Frank Act8-179
- [I][3] : New Rule 14a-11 Shareholder Nominations and Schedule 14N8-179
- [I][4] : The No Change of Control Purpose Requirement in Rule 14a-118-183
- [I][5] : Rule 14a-2(b)(7) Exemption for Soliciting to Form a Shareholder Nominating Group8-185
- [I][6] : Rule 14a-2(b)(8) Exemption for Soliciting in Support of Nominees8-186
- [I][7] : Other Related Changes8-187
- § 8:11.4 : CF Industries’ Hostile Exchange Offer and Proxy Contest for Terra8-188
- Appendix 8A : Microsoft’s Bear Hug Letter to Yahoo!App. 8A-1
- Appendix 8B : Oracle’s Schedule TO for Tender Offer for PeopleSoftApp. 8B-1
- Appendix 8C : Oracle’s Summary Advertisement for Tender Offer for PeopleSoftApp. 8C-1
- Appendix 8D : Oracle’s Offer to Purchase in Tender Offer for PeopleSoftApp. 8D-1
- Appendix 8E : PeopleSoft Schedule 14D-9App. 8E-1
- Appendix 8F : Getty Images, Going Private Management Buyout on Schedule 13E-3App. 8F-1
- Appendix 8G : Biogen 2008 Amendments to Advance Notice By-LawsApp. 8G-1
- Appendix 8H : CF Industries’ S-4 for Exchange Offer for TerraApp. 8H-1
- Appendix 8I : CF Industries’ Proxy Statement for Contested Election of Directors of TerraApp. 8I-1
- Appendix 8J : NRG’s Fight Letter in Response to Exelon’s Proxy ContestApp. 8J-1
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Chapter 9: |
Federal Income Tax Considerations in Taxable and Tax-Free Domestic M&A |
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- § 9:1 : Scope9-9
- § 9:2 : Realization and Recognition of Income on the Sale or Other Disposition of Property9-11
- § 9:2.1 : General Principles9-11
- § 9:2.2 : Introduction to the Exceptions to the Recognition Rule9-12
- § 9:2.3 : Installment Reporting Under Section 4539-12
- § 9:3 : Rate Structure of the Federal Income Tax9-15
- § 9:3.1 : Individual and Corporate Tax Rates on Ordinary Income, Capital Gains, and Dividends9-15
- § 9:3.2 : Dispositions of Property Used in a Trade or Business: Section 1231 Gains and Losses and Section 1245 Recapture of Ordinary Income9-16
- § 9:4 : Introduction to the Taxation of Corporations, Partnerships and S Corporations9-17
- § 9:4.1 : Characterization of Business Entities for Federal Income Tax Purposes9-17
- § 9:4.2 : The C Corporation9-18
- § 9:4.3 : The Partnership and the Limited Liability Company9-19
- § 9:4.4 : The S Corporation9-21
- § 9:4.5 : Private Letter Rulings9-22
- § 9:4.6 : Codification of the Economic Substance Doctrine9-22
- [A] : Introduction9-22
- [B] : When the Economic Substance Doctrine Applies9-23
- [C] : The Conjunctive, Objective, and Subjective Tests9-24
- [D] : Large Business and International Division Directive on Economic Substance Doctrine9-25
- § 9:4.7 : Reporting of Uncertain Tax Position (UTP)9-26
- § 9:5 : Elaboration on Basic Corporate Tax Principles9-28
- § 9:5.1 : Introduction9-28
- § 9:5.2 : Transfers of Property to Corporations Under Section 3519-28
- [A] : Transfers Without Liability Assumption9-28
- [B] : Contributions Involving Liability Assumptions9-30
- § 9:5.3 : Debt or Equity Issues9-31
- [A] : Tax Stakes in Debt Equity Issues9-31
- [A][1] : Introduction9-31
- [A][2] : Section 3519-31
- [A][3] : Interest Deduction9-31
- [A][4] : Dividend-Received Deduction9-32
- [A][5] : Redemptions9-32
- [A][6] : Original Issue Discount9-33
- [A][7] : AHYDOs9-33
- [A][8] : Interest on Deferred Payments9-35
- [A][9] : Below Market Loans9-35
- [A][10] : Bond Premium9-35
- [A][11] : Corporate Acquisition Indebtedness9-35
- [A][12] : Registration Requirement9-36
- [A][13] : Worthless Stock or Debt9-36
- [B] : Characterizing an Investment in a Corporation As Debt or Equity9-36
- § 9:5.4 : Treatment of Non-Liquidating Cash Distributions by C Corporations9-41
- § 9:5.5 : Treatment of Non-Liquidating Property Distributions by C Corporations9-45
- [A] : Treatment of the Shareholder9-45
- [B] : Treatment of the Corporation9-46
- § 9:5.6 : Redemptions of Stock by Corporations: Impact of Sections 302 and 3189-47
- [A] : General Principles9-47
- [B] : Impact of the Section 318 Attribution Rules9-49
- [C] : Treatment of the Corporation9-50
- [D] : Redemptions of Debt9-50
- § 9:5.7 : Redemptions Through Related Corporations: Impact of Section 3049-51
- § 9:5.8 : Stock Dividends9-51
- [A] : Introduction9-51
- [B] : Section 3059-51
- [C] : Section 306: The Preferred Stock Bailout9-53
- § 9:5.9 : Treatment of Liquidating Cash and Property Distributions by C Corporations to Non-80% Parent Shareholders9-53
- [A] : Introduction9-53
- [B] : Treatment of Non-80% Parent Shareholders on Receipt of a Liquidating Distribution: Section 3319-53
- [C] : Treatment of the Corporation on Making a Liquidating Distribution to Non-80% Parent Shareholders: Section 3369-54
- § 9:5.10 : Treatment of Liquidating Cash and Property Distributions by C Corporations to 80% Parent Shareholders9-54
- [A] : Treatment of 80% Parent Shareholder on Receipt of a Liquidating Distribution: Section 3329-54
- [B] : Treatment of the Corporation on Making a Liquidating Distribution to an 80% Parent Shareholder: Section 3379-56
- § 9:5.11 : Introduction to Consolidated Returns9-56
- [A] : Purpose9-56
- [B] : The Statutory Structure of the Consolidated Return Provisions9-56
- [C] : Computation of Consolidated Taxable Income and Consolidated Tax Liability9-57
- [D] : Intercompany Transactions9-58
- [E] : Introduction to the Investment Adjustment System9-59
- [E][1] : Excess Loss Accounts9-60
- [F] : Tiering Up of Earnings and Profits9-61
- [G] : Treatment of Cash and Property Distributions9-61
- § 9:6 : Overview of Taxable and Tax-Free Acquisitions9-63
- § 9:7 : Taxable Acquisition of the Assets of a Stand-Alone Target C Corporation9-63
- § 9:7.1 : Structure of the Direct Purchase of Assets Transaction9-63
- § 9:7.2 : Tax Treatment to the Parties9-65
- § 9:7.3 : Treatment of Intangibles to the Target and the Acquirer9-66
- § 9:7.4 : Allocation of Purchase Price Under Section 10609-67
- [A] : General Principles9-67
- [B] : Treatment of Assumption of Contingent Liabilities and Making of Contingent Payments9-68
- [C] : Provision of Asset Acquisition Agreement Allocating Purchase Price9-69
- § 9:7.5 : Installments Sale Treatment Under Section 453(h)9-69
9
- § 9:7.6 : Treatment of Covenants Not to Compete-70
- [A] : General Principles9-70
- [B] : Allocation to Personal Goodwill—Muskat9-71
- [C] : Reporting Requirement Under Section 1060(e)9-72
- § 9:7.7 : Potential Overlap with the Non-Divisive (D) Reorganization9-72
- § 9:7.8 : Target’s Tax Covenants Relating to Pre-Closing Taxes9-73
- § 9:7.9 : Acquirer’s Tax Covenants Relating to Post-Closing Taxes9-74
- § 9:7.10 : Golden Parachute Payments Under Section 280G in Asset Acquisitions9-75
- § 9:7.11 : Potential Personal Holding Company Tax Risk If Target Is Kept Alive9-75
- § 9:7.12 : Use of Partnership or S Corporation As the Acquirer9-75
- § 9:8 : Structure and Tax Treatment of the Parties in a Taxable Forward Merger9-75
- § 9:8.1 : In General9-75
- § 9:8.2 : Tax Consequences to the Target and Its Shareholders9-77
- § 9:8.3 : Tax Consequences to the Acquiring Subsidiary9-78
- [A] : Basis for Target’s Assets9-78
- [B] : Potential Zero Basis Problem9-78
- § 9:9 : Taxable Acquisition of the Assets of a Consolidated Subsidiary9-79
- § 9:9.1 : General Principles9-79
- § 9:9.2 : Taxable Forward Merger9-79
- § 9:10 : Taxable Acquisition of the Stock of a Stand-Alone Closely Held Target C Corporation9-79
- § 9:10.1 : Structure of the Direct Purchase of Stock Transaction9-79
- § 9:10.2 : Basic Tax Treatment to the Parties9-80
- § 9:10.3 : The Section 338 Election for Stand-Alone C Corporations9-81
- [A] : Introduction9-81
- [B] : The Basic Sale and Purchase Transaction9-82
- [C] : Aggregate Deemed Sales Price (ADSP) and Aggregate Grossed-Up Basis (AGUB)9-82
- [D] : Qualified Stock Purchase9-82
- [E] : The Election9-83
- [F] : The Tax Returns of the Old and New Targets9-83
- [G] : Elections for Subsidiaries of the Old Target9-84
- [H] : Effect of General Utilities Repeal on Section 338 Elections9-85
- [I] : Effect of Post-Acquisition Liquidation or Inter-Group Merger of Target—Overriding Yoc Heating9-85
- § 9:10.4 : What Should the Acquirer Pay for the Target’s Stock Where No Section 338 Election Is Made?9-87
- § 9:10.5 : Planning for the Utilization of Target’s Net Operating Losses and Other Tax Benefits After a Stock Acquisition9-89
- [A] : Introduction9-89
- [B] : The Section 382 Limitation on NOLs9-89
- [C] : Built-In-Losses and the Repeal of Notice 2008-839-90
- [D] : The Economics Behind the Section 382 Limitation9-91
- [E] : Interface of Section 382 with the Consolidated Return Regulations in the Acquisition of a Stand-Alone Target9-91
- [E][1] : Introduction9-91
- [E][2] : Applying the Section 382 Limitation to Target’s Consolidated Group9-92
- [E][3] : General Non-Applicability of the SRLY Rules After Target Becomes a Member of Acquirer’s Consolidated Group9-94
- [F] : General Non-Applicability of Section 2699-95
- [G] : Limitation on Carryback of Losses After LBOs: The CERT Provision, Section 172(h)9-96
- § 9:10.6 : Section 384 Limitation on Utilizing Acquirer’s Losses to Offset Built-In Gains of Acquired Subsidiary9-98
- § 9:10.7 : Intermediary Transaction Tax Shelters9-99
- § 9:10.8 : Indemnification Against Pre-Closing Tax Liabilities9-101
- § 9:10.9 : Treatment of Covenants Not to Compete9-101
- § 9:10.10 : Potential Applicability of Section 304 Where There Is an Overlap in Stock Ownership9-101
- § 9:11 : Taxable Acquisition of the Stock of a Stand-Alone Publicly Held or Closely Held Target C Corporation in a Reverse Subsidiary (Triangular) Merger9-102
- § 9:11.1 : General Principles9-102
- § 9:11.2 : Tender Offer Followed by Reverse Subsidiary Merger or Merger of Acquisition Subsidiary into Target9-104
- [A] : Tender Offer Followed by a Reverse Subsidiary Merger9-104
- [B] : Merger of a Newly Formed Acquisition Subsidiary into Target9-105
- § 9:11.3 : Planning for the Utilization of the Target’s NOLs and Other Tax Benefits9-105
- § 9:12 : Taxable Acquisition of the Stock of a Consolidated Subsidiary9-105
- § 9:12.1 : Introduction to the Options9-105
- § 9:12.2 : The Joint Section 338(h)(10) Election9-106
- [A] : General Principles9-106
- [B] : Acquiring a Target That Owns Subsidiaries9-106
- [C] : When Should a Joint Section 338(h)(10) Election Be Made?9-107
- [D] : Provisions of the Stock Purchase Agreement Dealing with the Section 338(h)(10) Election9-107
- [E] : Subsidiary’s Potential Liability for Selling Consolidated Group’s Taxes and Seller’s Indemnification of Buyer Against Pre-Closing Taxes9-109
- [F] : Treatment of Multi-Step Transactions: Turning Off the King Enterprises Step Transaction Doctrine9-110
- § 9:12.3 : No Section 338(h)(10) Election and No Section 338(g) Election9-112
- [A] : Introduction9-112
- [B] : Taxable Years of New Members of Consolidated Group9-112
- [B][1] : General Principles9-112
- [B][2] : Provisions of the Stock Purchase Agreement Addressing the Straddle Period Returns9-113
- [C] : Carryover and Back of NOLs Attributable to an Acquired Subsidiary9-115
- [C][1] : General Principles9-115
- [C][2] : Allocation of NOLs9-115
- [C][3] : Carryover of NOLs Subject to Section 382 Limitation9-116
- [C][4] : Carryback of NOLs9-117
- [C][5] : Election Not to Carryback NOLs and the Stock Purchase Agreement9-117
- [D] : Subsidiary’s Potential Liability for Selling Consolidated Group’s Taxes9-117
- § 9:12.4 : No Section 338(h)(10) Election, But a Section 338(g) Election9-118
- § 9:12.5 : Potential Section 336(e) Election on the Sale or Distribution of the Stock of a Subsidiary9-118
- § 9:12.6 : Potential Disallowance of Loss on Sale of Stock of a Consolidated Subsidiary9-125
- [A] : Introduction9-125
- [B] : Mirror Subsidiaries, Related Transactions, and the Disallowance of Loss Consolidated Return Regulations9-125
- [B][1] : In General9-125
- [B][2] : The Prototypical Mirror9-126
- [B][3] : Introduction to the Treasury Response to “Son of Mirror” Transactions9-127
- [B][4] : General Disallowance of Loss Rule9-129
- [B][5] : General Disallowance of Loss Rule in the 2008 Final Regulations9-129
- [B][6] : Economic Losses9-133
- [B][6][a] : Introduction9-133
- [B][6][b] : Allowable Losses Under Treasury Regulations Section 1.1502-20(c)9-134
- [B][6][c] : Allowable Losses Under Treasury Regulations Section 1.1502-369-134
- § 9:12.7 : Potential Excess Loss Account9-135
- § 9:13 : Treatment of LBOs9-136
- § 9:13.1 : General Principles9-136
- § 9:13.2 : Tax-Free Rollover of Management’s Shares Under Section 3519-136
- § 9:14 : Taxable Acquisitions by and of S Corporations9-137
- § 9:14.1 : Introduction9-137
- § 9:14.2 : Taxable Acquisition by an S Corporation of the Assets of a C Corporation9-138
- § 9:14.3 : Taxable Acquisition by an S Corporation of the Stock of a C Corporation9-139
- § 9:14.4 : Taxable Acquisition by a C Corporation of the Assets of an S Corporation9-139
- § 9:14.5 : Taxable Acquisition by a C Corporation of the Stock of an S Corporation: Impact of Section 338(h)(10)9-140
- § 9:15 : Special Rules Applicable to Publicly Held Corporations9-141
- § 9:15.1 : Golden Parachute Payments Under Section 280G9-141
- § 9:15.2 : Impact of Section 409A on Non-Qualified Deferred Compensation9-143
- § 9:15.3 : Greenmail Payments Under Section 58819-144
- § 9:16 : Introduction to Acquisitive Reorganizations9-144
- § 9:16.1 : In General9-144
- § 9:16.2 : Continuity of Interest9-145
- [A] : General Principles9-145
- [B] : Minimum Continuity of Interest9-146
- [C] : Pre- and Post-Reorganization Dispositions9-147
- [D] : Measuring Date for Determining If the Minimum Continuity of Interest Is Met9-147
- [E] : Contingent Consideration9-150
- [F] : Impact of Dissenters’ Rights9-150
- § 9:16.3 : Continuity of Business Enterprise9-153
- § 9:16.4 : The Eight Forms of Acquisitive Reorganizations9-154
- § 9:16.5 : Reorganizations and the Step Transaction Doctrine9-154
- § 9:17 : Asset Reorganizations9-156
- § 9:17.1 : Direct Mergers Under Section 368(a)(1)(A)9-156
- [A] : General Principles9-156
- [B] : Tax Treatment to the Parties9-158
- [C] : Merger of Target into a Disregarded Entity Owned by Acquirer9-159
- [D] : Step Transaction Doctrine: Converting a Failed “(B)” Into a Good “(A)”9-160
- [E] : Step Transaction Doctrine: Reverse Subsidiary Merger Followed by an Upstream Merger9-160
- § 9:17.2 : Forward Subsidiary Merger Under Section 368(a)(2)(D)9-161
- [A] : General Principles9-161
- [B] : Tax Treatment to the Parties9-162
- [C] : Merger of Target into a Disregarded Entity Owned by Acquiring Subsidiary9-163
- [D] : Addressing the Potential Failed Forward Subsidiary Merger9-164
- § 9:17.3 : Direct Stock for Asset Reorganization Under Section 368(a)(1)(C)9-165
- [A] : General Principles9-165
- [B] : Tax Treatment to the Parties9-166
- [C] : Step Transaction Doctrine: Non-Qualifying “(B)” May Qualify As a “(C)” If Target Is Liquidated9-167
- § 9:17.4 : Triangular Stock for Asset Reorganization Under Section 368(a)(1)(C)9-167
- [A] : General Principles9-167
- [B] : Tax Treatment to the Parties9-169
- § 9:17.5 : Nondivisive (D) Reorganization Under Sections 368(a)(1)(D) and 354(b)9-169
- [A] : General Principles9-169
- [B] : Tax Treatment to the Parties9-170
- [C] : The Cash Non-Divisive “(D)”9-171
- § 9:17.6 : Summary of Asset Reorganizations9-173
- § 9:18 : Stock Reorganizations and Acquisitive Section 351 Transactions9-173
- § 9:18.1 : Reverse Subsidiary Merger Under Section 368(a)(2)(E)9-173
- [A] : General Principles9-173
- [B] : Tax Treatment to the Parties9-174
- [C] : Step Transaction Doctrine, Including Upstream Merger or Liquidation After a Reverse Subsidiary Merger9-175
- § 9:18.2 : Stock for Stock Reorganization Under Section 368(a)(1)(B)9-177
- [A] : General Principles9-177
- [B] : Tax Treatment to the Parties9-178
- § 9:18.3 : Triangular “(B)” Reorganization Under Section 368(a)(1)(B)9-179
- § 9:18.4 : The Acquisitive Section 351 Transaction and the Horizontal Double Dummy9-180
- [A] : General Principles9-180
- [B] : Tax Treatment to the Parties9-182
- § 9:18.5 : Summary of Stock Reorganizations and Acquisitive Section 351 Transaction9-183
- § 9:19 : Over and Down Reorganizations Under Section 368(a)(2)(C)9-183
- § 9:20 : Summary of Treatment of Parties to an Acquisitive Reorganization9-183
- § 9:20.1 : Introduction9-183
- § 9:20.2 : Target’s Shareholders9-183
- § 9:20.3 : The Target9-184
- § 9:20.4 : The Acquirer, Acquiring Parent, and Acquiring Subsidiary9-184
- § 9:21 : Acquisitive Reorganizations Involving S Corporations9-184
- § 9:22 : Non-Acquisitive Reorganizations9-185
- § 9:22.1 : The Divisive “(D)” Reorganization: Spin-Offs9-185
- [A] : Introduction9-185
- [B] : The Divisive “(D)”: Spin-Offs, Split-Offs and Split-Ups9-185
- § 9:22.2 : The “(E)” Recapitalization9-187
- § 9:22.3 : The “(F)” Mere Change in Form9-188
- § 9:22.4 : The “(G)” Bankruptcy Reorganization9-188
- § 9:23 : Transaction Costs in Taxable Acquisitions and in Acquisitive Reorganizations9-188
- § 9:23.1 : Tension Between Expensing and Capitalizing9-188
- § 9:23.2 : Capitalization Regulations Applicable to Transaction Costs in M&A Transactions, Treasury Regulations Section 1.263(a)-59-189
- [A] : In General9-189
- [B] : Simplifying Conventions and Safe Harbors9-190
- [B][1] : Simplifying Conventions9-190
- [B][2] : Success Fee Safe Harbor9-190
- [C] : Special Rules for Certain Acquisitive Transactions, Treasury Regulations Section 1.263(a)-5(e)9-191
- [C][1] : Introduction9-191
- [C][2] : “Covered Transactions”: Taxable Stock and Asset Acquisitions and Acquisitive Reorganizations9-192
- [C][2][a] : General Principles9-192
- [C][2][b] : Treatment of the Target in a Taxable Asset Acquisition9-192
- [C][3] : Inherently Facilitative Payments9-193
- [C][4] : The Bright Line Rule for Non-Inherently Facilitative Expenditures9-193
- [C][5] : Documentation of Success-Based Fees9-194
- [C][6] : Treatment of Capitalized Costs9-194
- [C][6][a] : Introduction9-194
- [C][6][b] : Taxable Asset Acquisition9-194
- [C][6][b][i] : Treatment of the Acquirer in a Taxable Asset Acquisition9-194
- [C][6][b][ii] : Treatment of the Target in a Taxable Asset Acquisition9-195
- [C][6][c] : Taxable Stock Acquisition9-195
- [C][6][c][i] : Treatment of the Acquirer in a Taxable Stock Acquisition9-195
- [C][6][c][ii] : Treatment of the Target in a Taxable Stock Acquisition9-195
- [C][6][d] : Acquisitive Reorganizations9-196
- [C][6][d][i] : Treatment of the Acquirer in an Acquisitive Reorganization9-196
- [C][6][d][ii] : Treatment of the Target in an Acquisitive Reorganization9-196
- [C][6][e] : Treasury’s Request for Views on the Treatment of Capitalizable Transactions Costs in Taxable and Tax-Free Acquisitions9-196
- [C][7] : Treatment of Non-Capitalized Costs9-197
- [C][8] : Example of Inherently Facilitative, Facilitative, and Non-Facilitative Transactions Costs9-198
- [C][9] : Example of Simplifying Convention in Connection with an Acquisition Transaction9-199
- [C][10] : Example of Characterization of Expenses in Connection with Defending Against a Hostile Takeover9-199
- [D] : Termination Fees Paid by a Target to a Potential Acquirer9-200
- [D][1] : Termination Fees Under Treasury Regulations Section 1.263(a)-5(c)(8)9-200
- [D][2] : Tax Court Holds That Termination Fee Is Deductible—Santa Fe9-202
- [E] : Illustration of the Application of the Section 263 Regulations9-203
- § 9:24 : Provisions of Acquisition Agreements Dealing with Tax Issues9-203
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Chapter 10: |
Financial and SEC Accounting Considerations; And Appendices 10A-10D |
|
|
- § 10:1 : Scope10-3
- § 10:1.1 : References10-4
- § 10:2 : Introduction to Financial Accounting: The Balance Sheet, Income Statement, and Cash Flow Statement10-4
- § 10:2.1 : Introduction10-4
- § 10:2.2 : The Balance Sheet10-5
- § 10:2.3 : The Income Statement10-8
- § 10:2.4 : Relationship Between the Income Statement and the Balance Sheet10-9
- § 10:2.5 : Cash Flow Statement10-9
- § 10:3 : Introduction to the SEC’s Financial Statement Requirements10-10
- § 10:3.1 : In General: GAAP, GAAS and the PCAOB10-10
- [A] : Background10-10
- [B] : PCAOB Inspections and the Due Diligence Process10-11
- § 10:3.2 : Potential Adoption of International Financial Reporting Standards10-12
- § 10:3.3 : The Required Financial Statements in Form S-1 and Form 10-K—Regulation S-X10-14
- § 10:4 : FASB 2001 and 2007 Revision of the Accounting Treatment of Business Combinations10-14
- § 10:4.1 : Introduction10-14
- § 10:4.2 : Joint Project of the FASB and the International Accounting Standards Committee in Adopting the “Acquisition Method”10-16
- § 10:4.3 : FASB Statement No. 141 Revised Requiring the “Acquisition Method” for Business Combinations10-17
- [A] : Introduction10-17
- [B] : Measuring Goodwill10-20
- [C] : Treatment of Contingent Consideration and Contingent Liabilities10-21
- [D] : Treatment of Acquisition-Related Costs10-23
- [E] : Treatment of In-Process Research and Development10-24
- [F] : Disclosure10-25
- [G] : Illustration of the Purchase Method in the Sirius–XM Merger Under the Original Statement 14110-25
- § 10:4.4 : FASB Statement No. 142 on Treatment of Goodwill and Other Intangibles in Business Combinations10-30
- [A] : In General10-30
- [B] : Illustration of an Impairment Charge for Goodwill Resulting from a Merger—AOL–Time Warner10-32
- [C] : HP?s Impairment Charge for Autonomy10-33
- § 10:4.5 : Report on the Impact of FASB
Statements 141 and 14210-34
- § 10:5 : Impact of FASB Statement 109 and FIN 48 on GAAP Accounting for Tax Positions10-35
- § 10:5.1 : FASB Statement No. 10910-35
- [A] : Introduction10-35
- [B] : Deferred Tax Liabilities10-36
- [C] : Deferred Tax Assets10-39
- [D] : Deferred Tax Assets and Liabilities Arising in Acquisitions10-41
- [D][1] : Introduction10-41
- [D][2] : Illustration of a Deferred Tax Liability Arising in an Acquisition10-42
- [D][3] : Illustration of a Deferred Tax Asset Arising in an Acquisition10-46
- § 10:5.2 : FIN 48 Accounting for Uncertain Taxes10-46
- [A] : Basic Principles10-46
- [B] : Impact of FIN 48 in Acquisitions10-50
- § 10:6 : Comparing the Treatment of Goodwill and Intangibles Under the Federal Income Tax and the Financial Accounting Rules10-52
- § 10:7 : SEC’s Financial Disclosure Requirements Related to Mergers in Which Securities of the Acquirer Are Issued—Form S-4 and Regulation S-X10-52
- § 10:7.1 : Introduction10-52
- § 10:7.2 : Selected Financial Data of Sirius and of XM, S-4, Item 3(d), Regulation S-K, Item 30110-53
- § 10:7.3 : Summary Pro Forma Information for Sirius Assuming Consummation of the Merger, S-4, Item 3(e), Regulation S-K, Item 30110-54
- § 10:7.4 : Book Value, Dividends, and Income (Loss) of Sirius and XM, S-4, Item 3(f)10-54
- § 10:7.5 : Market Values of the Stock of Sirius and XM, S-4, Item 3(g)10-55
- § 10:7.6 : Pro Forma Financial Information, S-4, Item 5, Regulation S-X, Article 1110-55
- § 10:8 : SEC’s Financial Disclosure Requirements for the Public Acquirer Where the Consideration Is Cash—Regulation S-X10-59
- § 10:8.1 : In General10-59
- § 10:8.2 : The Financial Statement Requirement of Item 9.01(a)10-59
- § 10:8.3 : The Pro Forma Requirement of Item 9.01(b)10-61
- § 10:9 : Push Down Accounting10-62
- Appendix 10A : Accounting and Financial Provisions of Sirius–XM Prospectus/Proxies, October 2, 2007App. 10A-1
- Appendix 10B : Sirius Financial Statements Included in Form 10-K for 2007App. 10B-1
- Appendix 10C : Oracle Form 8-Ks Regarding the Completion of Its Acquisition of BEA Systems for Cash and the Filing of the Required FinancialsApp. 10C-1
- Appendix 10D : Pfizer S-4 for Acquisition of Wyeth, June 17, 2009—Financial StatementsApp. 10D-1
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Chapter 11: |
Valuation Considerations in M&A and Dealing with Investment Bankers; And Appendices 11A-11G |
|
|
- § 11:1 : Scope11-6
- § 11:1.1 : References11-8
- § 11:2 : Importance of Modern Valuation Concepts for Non-Valuation Experts11-9
- § 11:2.1 : Impact in Appraisal: Introduction to the Technicolor Appraisal Proceeding11-9
- § 11:2.2 : Impact of Fairness Opinions in SEC Disclosure Documents and Under Delaware Disclosure Law11-11
- § 11:2.3 : Impact in Other Contexts11-13
- § 11:3 : Introduction to Present Value, Net Present Value, and Internal Rate of Return11-13
- § 11:3.1 : Basic Concept of Present Value11-13
- § 11:3.2 : Basic Concept of Net Present Value11-17
- § 11:3.3 : Basic Concept of Internal Rate of Return11-18
- § 11:3.4 : Relationship Between NPV and IRR11-18
- § 11:3.5 : Reason for Use of NPV in Making Investment Decisions11-18
- [A] : In General11-18
- [B] : NPV and Economic Rents11-18
- § 11:3.6 : Capital Rationing and NPV11-19
- § 11:4 : Present Value of Multiyear Income Flows: The Discounted Cash Flow and Net Present Value Formulas11-20
- § 11:4.1 : Introduction11-20
- § 11:4.2 : The Five Basic Steps in Using DCF and NPV11-21
- § 11:4.3 : Use of DCF and Other Methodologies in Time’s Acquisition of Warner11-23
- § 11:5 : Estimating Free (or Negative) Cash Flows and Terminal Value11-24
- § 11:5.1 : Introduction11-24
- § 11:5.2 : General Principles11-24
- § 11:5.3 : Estimating Cash Flows11-25
- § 11:5.4 : Estimate Cash Flows on an Incremental Basis11-26
- § 11:5.5 : Separate the Investment Decision from the Financing Decision11-27
- § 11:5.6 : Treat Inflation Consistently11-27
- § 11:5.7 : Illustration of Estimation of Free (or Negative) Cash Flows11-28
- [A] : In General11-28
- [B] : Estimation of Free Cash Flows in Orchard11-29
- § 11:5.8 : Use of a Formula in Estimating Free Cash Flow11-31
- § 11:5.9 : Estimating Terminal Value11-34
- [A] : Introduction11-34
- [B] : Estimating Terminal Value Through the Constant Growth Model11-36
- [C] : Estimating Terminal Value Through the Competitive Equilibrium Model11-37
- [D] : Estimating Terminal Value by Reference to Price: Earnings Ratios11-40
- [E] : Estimating Terminal Value by Reference to Market/Book Ratios11-41
- [F] : Summary of Results Under the Four Methods11-42
- [G] : Estimating Terminal Value in Time Warner Acquisition: Multiple of Cash Flow Method11-43
- [H] : Estimation of Terminal Value in Orchard11-43
- § 11:5.10 : Sensitivity Analysis11-44
- § 11:5.11 : Summary11-45
- § 11:6 : Use of the Capital Asset Pricing Model (CAPM) in Determining the Appropriate Equity Discount Rate11-45
- § 11:6.1 : Introduction11-45
- § 11:6.2 : Beta: The Measure of Market Risk11-46
- [A] : Introduction11-46
- [B] : Further Elaboration on Beta11-47
- § 11:6.3 : Risk Free Rate and Market Risk Premium11-48
- § 11:6.4 : The Capital Asset Pricing Model11-49
- § 11:6.5 : Asset and Equity Betas11-50
- § 11:6.6 : The Beta Levered and Unlevering Formula11-53
- § 11:6.7 : Fama and French Critique of CAPM11-56
- § 11:6.8 : Determination of the Discount Rate in Orchard—The Superiority of CAPM11-57
- [A] : The Chancellor Finds CAPM Superior11-57
- [B] : The Chancellor Sets Out the
Elements of CAPM11-58
- [C] : The Chancellor Explains the Disagreements Between the Party’s Experts on the Elements of CAPM11-58
- [D] : The Chancellor Accepts the Supply-Side Equity Risk Premium11-59
- [E] : The Chancellor Rejects a Company-Specific Risk Premium11-60
- [F] : The Chancellor Accepts a Size Premium11-61
- § 11:7 : Use of Arbitrage Pricing Theory (APT) in Determining the Appropriate Equity Discount Rate11-62
- § 11:8 : Interaction Between Investment and Financing Decisions11-62
- § 11:8.1 : The Adjusted Present Value Method (APV)11-62
- § 11:8.2 : Use of the Weighted Average Cost of Capital (WACC) in Determining the Appropriate Discount Rate11-64
- § 11:8.3 : The Equity DCF: Discounting Free Cash Flows with Interest Deducted11-67
- § 11:9 : Application of DCF in Acquisitions That Produce Synergies11-67
- § 11:10 : Illustration of the Application of DCF, NPV and CAPM in an Acquisition Context11-68
- § 11:10.1 : A Hypothetical Acquisition11-68
- § 11:10.2 : Proxy Statement Description of DCF Analysis Used to Value Toys11-71
- § 11:10.3 : DCF Methods Accepted with Modifications—Sunbelt and Global11-72
- § 11:11 : Lazard’s Use of Beta, CAPM, and the Formula for Levering and Delevering Beta in Computing Conrail’s WACC and Present Value11-74
- § 11:11.1 : Introduction11-74
- § 11:11.2 : Computation of Levered Beta11-74
- § 11:11.3 : Conversion of Levered Beta to Unlevered Beta11-75
- § 11:11.4 : Recomputation of Levered Beta for Various Debt-to-Equity Ratios11-77
- § 11:11.5 : Use of CAPM to Compute Cost of Levered Equity11-79
- § 11:11.6 : Computation of Conrail’s Weighted Average Cost of Capital11-80
- § 11:11.7 : Use of WACC in Determining Present Value of Conrail’s Free Cash Flow11-82
- § 11:11.8 : Summary of Lazard’s DCF Valuation Approach11-85
- § 11:12 : Non-DCF Valuation Techniques: Comparable Companies and Comparable Transactions11-85
- § 11:12.1 : Introduction to the Direct Comparisons11-85
- § 11:12.2 : Equivalence Between Direct Comparison and Direct Capitalization11-87
- § 11:12.3 : Selecting Comparable Companies and Determining Multiples11-88
- § 11:12.4 : Selecting the Value Indicator and the Observable Variable11-90
- § 11:12.5 : Accounting for Control Premiums: The Comparable Transactions Approach11-93
- § 11:12.6 : Applicability of the Direct Comparison Approach in Time Warner, Toys, Sunbelt, and Global11-93
- [A] : Introduction11-93
- [B] : Comparable Transactions11-94
- [C] : Comparable Companies11-95
- [D] : Comparable Methods Rejected—Sunbelt and Global11-97
- [C] : Comparable Companies Rejected in Orchard11-99
- § 11:13 : Contribution Analysis11-100
- § 11:14 : Accretion/Dilution Analysis11-103
- § 11:15 : Determining If the Acquirer Has Properly Valued the Target: Introduction to Event Studies11-103
- § 11:16 : Issues in Dealing with Investment Bankers11-108
- § 11:16.1 : Introduction11-108
- § 11:16.2 : Financial Industry Regulatory Authority (FINRA) Disclosure Requirements Regarding Fairness Opinions Issued by Investment Bankers11-108
- § 11:16.3 : Negotiating Engagement Letters with Investment Bankers11-109
- [A] : Purpose11-109
- [B] : The Parties, the Transaction, and Exclusivity11-110
- [C] : Provision of Services11-110
- [C][1] : In General11-110
- [C][2] : Fairness Opinions and Reliance on Information Provided11-110
- [C][3] : Fairness Opinions: No Duty to Update11-112
- [C][4] : Fairness Opinions: Nondisclosure Without Investment Banker’s Permission11-113
- [C][5] : Fairness Opinions: Only Board Can Rely11-113
- [C][6] : Information Regarding Contacts with the Company11-115
- [D] : Key Man Provision11-115
- [E] : Fees11-115
- [E][1] : In General11-115
- [E][2] : Work Fee11-116
- [E][3] : Success Fee11-117
- [E][3][a] : In General11-117
- [E][3][b] : Potential Conflict of Interest with Success Fees11-117
- [E][4] : Break-Up Fee11-122
- [E][5] : Incentive Fee11-122
- [E][6] : Fees for Representing the Target in a Hostile Deal11-123
- [F] : Work by the Investment Banker in Financing the Transaction and Related Work11-123
- [G] : Reimbursement for Costs and Expenses11-124
- [H] : The Term and Termination11-125
- [I] : Indemnification and Contribution and Limitation on Liability11-126
- [J] : Confidentiality11-127
- [K] : Publicity11-128
- [L] : Conflicts of Interests and Trading in Securities11-128
- [M] : Legitimacy of Choice of Law Provision of an Engagement Letter—DLJ11-129
- [N] : Illustration of the Provisions of an Engagement Letter—Oppenheimer11-130
- [O] : Miscellaneous11-134
- § 11:16.4 : When the Deal Goes Bad: Sue the Investment Banker11-134
- [A] : Introduction11-134
- [B] : Actions by the Company or the Company’s Representative Against Its Investment Banker11-135
- [B][1] : Bear Stearns Held Liable for Negligent Advice Regarding a Tender Offer: The Ninth Circuit’s Approach—Daisy Systems11-135
- [B][2] : The Importance of the Engagement Letter in Determining the Obligations of the Investment Banker: The Seventh Circuit’s Approach—HA-LO11-137
- [B][3] : Citigroup Not Liable to Terra for Fraud11-140
- [B][4] : Legitimacy of Malpractice Claims Against Investment Banker—DLJ11-142
- [C] : Actions by Shareholders Against Company’s Investment Banker11-145
- [C][1] : Shareholders Sue Investment Banker on a Principal-Agent Theory: The New York Approach—Lazard and Goldman Sachs11-145
- [C][2] : Shareholders Sue Investment Banker for Fraud, Breach of Contract, and Breach of the Duty of Care: The Delaware Approach—DFI and Shoe-Town11-147
- [C][3] : Allegation That Investment Banker Violated Its Obligation to Give Target’s Shareholders Hedging Advice: The Seventh Circuit’s Contract Analysis—Joyce v. Morgan Stanley11-149
- [C][4] : Allegation that Target’s Investment Banker Breached Contract and Other Duties to Target’s Controlling Shareholder—Baker v. Goldman11-151
- [C][5] : Preclusion and the Delaware Carve-Out from SLUSA—Madden11-156
- [C][6] : Goldman’s Undervaluing of Consideration Paid by Acquirer to Controller for Target, “Relative Valuation,” and No Update—Southern Peru11-161
- [D] : Action by Target’s Shareholder Against Investment Banker for Acquirer11-167
- [D][1] : Action by Closely Held Acquirer Against Target’s Investment Banker—Morgan Stanley11-167
- [D][2] : Action by Shareholders of Public Acquirer Against Acquirer’s Investment Banker—Inland REIT11-168
- [E] : Action by AOL Shareholders Against Credit Suisse and Its Analysts11-171
- § 11:16.5 : Disclosures and Conflicts Involving Investment Bankers11-173
- Appendix 11A : S-4 Discussion of Financial Advisor’s Fairness Opinion for Sirius in Its Acquisition of XMApp. 11A-1
- Appendix 11B : Lazard’s Computation of Conrail’s Weighted Average Cost of CapitalApp. 11B-1
- Appendix 11C : Lazard’s Discounted Cash Flow Analysis of ConrailApp. 11C-1
- Appendix 11D : Wasserstein and Shearson Valuation of WarnerApp. 11D-1
- Appendix 11E : Proxy Statement Discussion of Financial Advisor’s Fairness Opinion for ToysApp. 11E-1
- Appendix 11F : Sample Buy-Side Investment Banker Engagement LetterApp. 11F-1
- Appendix 11G : Sample Sell-Side Investment Banker Engagement LetterApp. 11G-1
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Chapter 12: |
U.S. Substantive Antitrust Analysis |
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- § 12:1 : Scope12-5
- § 12:1.1 : References12-7
- § 12:2 : The Economic Case for Antitrust Enforcement12-7
- § 12:2.1 : Introduction12-7
- § 12:2.2 : Characteristics of Pure or Perfect Competition12-7
- § 12:2.3 : Characteristics of a Monopoly12-9
- § 12:2.4 : Characteristics of an Oligopoly12-12
- § 12:3 : Principal Antitrust Laws Governing M& A12-13
- § 12:4 : Introduction to the Supreme Court’s Interpretation of Section 7 in Horizontal Mergers12-15
- § 12:5 : Introduction to the 1992 and 2010 DOJ/FTC Guidelines12-20
- § 12:5.1 : In General12-20
- § 12:5.2 : Introduction to the 1992 DOJ/FTC Guidelines12-21
- § 12:5.3 : Introduction to the 2010 DOJ/FTC Guidelines12-24
- [A] : Comparing the Structures of the 2010 and 1992 DOJ/FTC Guidelines12-24
- [B] : Overview Section of the 2010 DOJ/FTC Guidelines12-25
- [C] : Evidence of Adverse Competitive Effects Under the 2010 DOJ/FTC Guidelines12-27
- [D] : Targeted Customers and Price Discrimination Under the 2010 DOJ/FTC Guidelines12-28
- [E] : Mergers of Competing Buyers Under the 2010 DOJ/FTC Guidelines12-29
- [F] : Partial Acquisitions Under the 2010 DOJ/FTC Guidelines12-30
- § 12:6 : Market Definition Under the 1992 DOJ/FTC Horizontal Merger Guidelines12-31
- § 12:6.1 : Introduction12-31
- § 12:6.2 : Product Market Definition Under the 1992 DOJ/FTC Guidelines12-31
- § 12:6.3 : Illustration of Product Market Definition Based on Pricing Evidence—Staples12-33
- § 12:6.4 : Illustration of Product Market Definition Based on SSNIP, Critical Loss, and Core and Marginal Customers—Whole Foods12-34
- [A] : Introduction12-34
- [B] : The District Court’s Discussion of the SSNIP Test and Critical Loss Analysis12-35
- [B][1] : Background12-35
- [B][2] : The Guidelines’ SSNIP Test12-36
- [B][3] : Focusing on Marginal and Not Core Customers12-37
- [B][4] : The Basic Elements of Critical Loss Analysis12-39
- [B][5] : The Three Steps of Critical Loss Analysis12-41
- [B][6] : The First Step of Critical Loss Analysis12-41
- [B][7] : The Second Step of Critical Loss Analysis12-42
- [B][8] : The Third Step of Critical Loss Analysis12-43
- [B][9] : The Court’s Conclusion on Critical Loss Analysis12-44
- [B][10] : What About the Cellophane Fallacy?12-45
- [C] : The Circuit Court’s Focus on Core Customers12-45
- [C][1] : Background12-45
- [C][2] : The Significance of Core Customers: Judges Brown and Tatel12-46
- [C][3] : Judge Tatel’s Views on Industry Studies and Statements Made by the Parties’ CEOs12-51
- [C][4] : Judge Tatel’s Criticism of Whole Foods’ Critical Loss Analysis12-53
- § 12:6.5 : Geographic Markets Definition Under the 1992 DOJ/FTC Guidelines12-53
- § 12:6.6 : Illustration of Geographic Market Definition—Oracle12-54
- § 12:6.7 : 2006 DOJ/FTC 2006 Comments on Guidelines—Market Definition12-55
- § 12:6.8 : Market Definition Under the 2010 DOJ/FTC Guidelines12-56
- [A] : In General12-56
- [B] : Product Market Definition12-57
- [B][1] : The Hypothetical Monopolist Test12-57
- [B][2] : Implementing the Hypothetical Monopolist Test12-58
- [B][3] : Critical Loss Analysis12-58
- [B][4] : Targeted Customers; Price Discrimination12-59
- [C] : Geographic Market Definition12-59
- § 12:7 : Application of the Committed and Uncommitted Potential Entrant Provisions of the 1992 and 2010 DOJ/FTC Guidelines12-60
- § 12:7.1 : Introduction12-60
- § 12:7.2 : Uncommitted Potential Entrant and Market Measurement Under the 1992 DOJ/FTC Guidelines12-60
- § 12:7.3 : Rapid Entry Under the 2010 DOJ/FTC Guidelines12-63
- § 12:8 : Identifying Market Participants and Their Market Shares12-63
- § 12:8.1 : The 1992 DOJ/FTC Guidelines12-63
- § 12:8.2 : The 2010 DOJ/FTC Guidelines12-64
- § 12:9 : Basic Enforcement Standards Under the 1992 and 2010 DOJ/FTC Horizontal Merger Guidelines12-64
- § 12:9.1 : Introduction to the Herfindahl-Hirschman Index12-64
- § 12:9.2 : Post-Merger HHI Below 1000; The 1992 DOJ/FTC Guidelines12-66
- § 12:9.3 : Post-Merger HHI Between 1000 and 1800; The 1992 DOJ/FTC Guidelines12-66
- § 12:9.4 : Post-Merger HHI Above 1800; The 1992 DOJ/FTC Guidelines12-68
- § 12:9.5 : Overstatement or Understatement of Market Shares and Concentration—General Dynamics12-70
- [A] : The 1992 DOJ/FTC Guidelines12-70
- [B] : The 2010 DOJ/FTC Guidelines12-70
- § 12:9.6 : 2006 DOJ/FTC Comments on the 1992 DOJ/FTC Guidelines—Concentration12-71
- § 12:9.7 : 2010 DOJ/FTC Guideline Enforcement Standards12-72
- § 12:10 : Overview of Section 2 of the 1992 DOJ/FTC Guidelines; Potential Adverse Competitive Effects of Mergers12-74
- § 12:10.1 : Potential Adverse Competitive Effects: An Introduction to Other Oligopoly Factors12-74
- § 12:10.2 : 2006 DOJ/FTC Comments on Guidelines—Adverse Competitive Effects12-74
- § 12:11 : Lessening of Competition Through Coordinated Interactions Under the 1992 and 2010 DOJ/FTC Guidelines12-75
- § 12:11.1 : Introduction12-75
- § 12:11.2 : Conditions Conducive to Coordination; The 1992 DOJ/FTC Guidelines12-77
- § 12:11.3 : Conditions Conducive to Detection and Punishment: Mavericks—The 1992 DOJ/FTC Guidelines12-77
- § 12:11.4 : The Power Buyer Defense12-78
- [A] : The 1992 DOJ/FTC Guidelines12-78
- [B] : The 2010 DOJ/FTC Guidelines12-78
- § 12:11.5 : 2006 DOJ/FTC Comments on Guidelines—Coordinated Interactions12-79
- § 12:11.6 : Coordinated Effects Under the 2010 DOJ/FTC Guidelines12-80
- § 12:12 : Lessening of Competition Through Unilateral Effects Under the 1992 and 2010 DOJ/FTC Guidelines12-81
- § 12:12.1 : Introduction12-81
- § 12:12.2 : 35% First and Second Rule for Differentiated Products; The 1992 DOJ/FTC Guidelines12-82
- [A] : Basic Principles12-82
- [B] : The Closeness of Substitutes Rule12-84
- [C] : Rival Sellers Rule12-84
- § 12:12.3 : 35% Capacity Rule for Undifferentiated Products; The 1992 DOJ/FTC Guidelines12-84
- § 12:12.4 : Unilateral Effects in the Courts—Kraft and Oracle12-85
- § 12:12.5 : 2006 DOJ/FTC Comments on 1992 DOJ/FTC Guidelines—Unilateral Effects12-88
- § 12:12.6 : Unilateral Effects Under the 2010 DOJ/FTC Guidelines12-90
- [A] : Introduction12-90
- [B] : Pricing of Differentiated Products12-90
- [B][1] : In General12-90
- [B][2] : Upward Pricing Pressure12-91
- [C] : Bargaining and Auctions12-93
- [D] : Capacity and Output for Homogeneous Products12-93
- [E] : Innovation and Product Variety12-93
- § 12:13 : Entry Under the 1992 and 2010 DOJ/FTC Guidelines12-94
- § 12:13.1 : Introduction12-94
- § 12:13.2 : Timeliness of Entry; The 1992 DOJ/FTC Guidelines12-96
- § 12:13.3 : Likelihood of Entry; The 1992 DOJ/FTC Guidelines12-96
- § 12:13.4 : Sufficiency of Entry; The 1992 DOJ/FTC Guidelines12-100
- § 12:13.5 : Summary of the 1992 DOJ/FTC Guidelines12-101
- § 12:13.6 : 2006 DOJ/FTC Comments on the 1992 DOJ/FTC Guidelines—Entry12-101
- § 12:13.7 : Illustration: Rejection of Entry Claims—Chicago Bridge12-102
- § 12:13.8 : Entry Under the 2010 DOJ/FTC Guidelines12-103
- § 12:14 : Efficiencies Under the 1992 and 2010 DOJ/FTC Guidelines12-104
- § 12:14.1 : Guidelines’ Rationale for Considering Efficiencies12-104
- § 12:14.2 : Impact of Efficiencies in Coordinated Interaction and Unilateral Effects Cases; The 1992 DOJ/FTC Guidelines12-104
- § 12:14.3 : Dynamic Efficiencies; The 1992 DOJ/FTC Guidelines12-105
- § 12:14.4 : Merger-Specific Efficiencies; The 1992 DOJ/FTC Guidelines12-105
- § 12:14.5 : Verification; The 1992 DOJ/FTC Guidelines12-105
- § 12:14.6 : Cognizable Efficiencies; The 1992 DOJ/FTC Guidelines12-106
- § 12:14.7 : Enforcement Standards; The 1992 DOJ/FTC Guidelines12-106
- § 12:14.8 : Types of Efficiencies Likely to Be Considered; The 1992 DOJ/FTC Guidelines12-107
- § 12:14.9 : Efficiencies in the Cases and at the Agencies—Heinz, Staples, Miller–Coors, and Sirius–XM12-108
- § 12:14.10 : 2006 DOJ/FTC Comments on the 1992 DOJ/FTC Guidelines—Efficiencies12-111
- § 12:14.11 : Efficiencies Under the 2010 DOJ/FTC Guidelines12-112
- § 12:15 : Brief Introduction to the DOJ’s 1984 Vertical and Conglomerate Guidelines12-113
- § 12:15.1 : Introduction12-113
- § 12:15.2 : Conditions Necessary for a Potential Challenge to a Vertical Merger12-113
- § 12:15.3 : Conditions Necessary for a Potential Challenge to a Conglomerate Merger12-115
- § 12:16 : Merger Enforcement in the Obama Administration12-116
- § 12:16.1 : Proposals Regarding Merger Enforcement in the Obama Administration12-116
- § 12:16.2 : Illustrative 2011 Merger Cases in the Obama Administration—NYSE, AT&T, H&R Block12-118
- [A] : Introduction12-118
- [B] : The NYSE, NASDAQ Transaction12-120
- [C] : The AT&T, T-Mobile Transaction12-121
- [D] : The H&R Block, TaxAct Transaction12-122
- [E] : Eleventh Circuit Upholds FTC’s Divestiture Order in Polypore12-125
- § 12:17 : Antitrust Challenges to Mergers by Consumers, Competitors and Targets12-127
- § 12:17.1 : Introduction12-127
- § 12:17.2 : Actions by Consumers12-127
- § 12:17.3 : Actions by Competitors12-128
- § 12:17.4 : Actions by Targets12-130
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Chapter 13: |
U.S. Pre-Merger Notification; And Appendices 13A-13B |
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- § 13:1 : Scope13-3
- § 13:1.1 : References13-5
- § 13:2 : Introduction13-5
- § 13:2.1 : In General13-5
- § 13:2.2 : Penalties13-6
- § 13:2.3 : Substance Over Form13-7
- § 13:2.4 : Annual Adjustments to HSR Thresholds13-7
- § 13:2.5 : FTC and DOJ Annual Report on Hart-Scott-Rodino13-7
- § 13:3 : Impact of HSR in Pre-Filing Period13-9
- § 13:3.1 : Description of the Period13-9
- § 13:3.2 : Transactions Subject to HSR: The Large, Mid-Market, and Small Transaction Rules13-9
- [A] : In General13-9
- [B] : The Large Transaction Rule13-9
- [C] : The Mid-Market Transaction Rule13-10
- [D] : The Small Transaction Rule13-10
- [D][1] : In General13-10
- [D][2] : Differences in the Applicability of the Small Transaction Rule in Stock and Asset Acquisitions: Treatment of Liabilities13-10
- § 13:3.3 : Exemptions13-11
- [A] : In General13-11
- [B] : The “Solely for Investment” Exemption13-11
- [C] : Exemption for Bank Holding Company Acquisitions—Mixed Transactions13-13
- [D] : Acquisitions in Excess of 50% of a Target’s Stock13-14
- § 13:3.4 : Determining the Acquiring and Acquired Persons13-15
- [A] : In General13-15
- [B] : Determining the Acquiring and Acquired Persons in Stock Acquisitions and Asset Acquisitions for Cash13-16
- [C] : Acquiring and Acquired Persons in Mergers of Stand-Alone Corporations in Exchange for Cash13-17
- [D] : Acquiring and Acquired Persons in Stock Acquisitions, Asset Acquisitions and Mergers in Exchange for Stock of the Acquirer13-17
- § 13:3.5 : Determining Whether Large or Mid-Market Transaction Rules Apply13-19
- § 13:3.6 : Determining Whether the Size of Transaction Rule Is Satisfied: Stock or Assets Held As a Result of the Acquisition13-19
- § 13:3.7 : Determining Whether the Size of Person Test Is Satisfied13-21
- § 13:3.8 : Secondary Acquisitions13-21
- § 13:3.9 : The Notification Thresholds for Partial Stock Acquisitions13-22
- § 13:3.10 : Proposed HSR Rules Relating to Transfers of Pharma Patent Rights13-23
- § 13:4 : Preparation of the Report Form and Filing Fee13-24
- § 13:4.1 : General Principles Regarding Preparation of the Report Form13-24
- § 13:4.2 : Item 4(c) and Item 4(d) Documents13-26
- [A] : Item 4(c) Documents13-26
- [B] : Item 4(d) Documents, As Added by 2011 Amendments13-29
- § 13:4.3 : The Filing Fee13-32
- § 13:4.4 : Electronic Filing13-32
- § 13:4.5 : Confidentiality13-32
- § 13:4.6 : Associate Reporting Rules, As Added by 2011 Amendments13-33
- § 13:5 : Impact of HSR in Post-Filing Period13-35
- § 13:5.1 : In General13-35
- § 13:5.2 : Review of the Form by the FTC’s Pre-Merger Notification Office and the Clearance Process13-36
- § 13:5.3 : Conduct of Merger Investigations13-37
- § 13:5.4 : Coordinating Merger Investigations with State Attorneys General and the European Union13-37
- § 13:5.5 : Basic Waiting Period Rules13-38
- [A] : Starting the Waiting Period: Negotiated Mergers and Asset Acquisitions and Acquisitions of the Stock of a Controlled Subsidiary13-38
- [B] : Starting the Waiting Period: Open Market Purchases, Tender Offers, and Certain Other Acquisitions of Stock13-38
- [C] : Ending the Waiting Period13-40
- [D] : Early Termination13-40
- § 13:5.6 : Second Requests: Description of the Rule and Effect on Waiting Period13-41
- [A] : In General13-41
- [B] : Model Second Request and Appeal Procedures13-42
- [C] : The Quick Look Procedure13-42
- § 13:5.7 : Summary Table of Waiting Period Rules13-43
- § 13:6 : FTC or DOJ Challenge to the Transaction13-45
- § 13:6.1 : In General13-45
- § 13:6.2 : Standard When DOJ Seeks a Permanent Injunction13-46
- § 13:6.3 : Standard When FTC Seeks a Preliminary Injunction13-46
- § 13:7 : Jumping-the-Gun13-48
- § 13:7.1 : Exchange of Competitively Sensitive Information in the Due Diligence Process—Omnicare13-48
- § 13:7.2 : Jumping-the-Gun During the Post-Signing Period—Smithfield13-51
- § 13:8 : Provisions of Merger Agreements Addressing Antitrust Review Issues13-53
- § 13:8.1 : Introduction13-53
- § 13:8.2 : Elaboration on Reverse Termination Fees—Antitrust RTFs in Google and AT&T13-54
- Appendix 13A : Antitrust Provisions of the Whirlpool–Maytag Merger AgreementApp. 13A-1
- Appendix 13B : Antitrust Provisions of the Dow Chemical–Rohm and Haas Merger AgreementApp. 13B-1
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Chapter 14: |
Introduction to Leveraged Buyouts; And Appendices 14A-14E |
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- § 14:1 : Scope14-2
- § 14:2 : The Principal Parties to an LBO: Illustrated Through the Getty Images LBO14-4
- § 14:2.1 : Introduction14-4
- § 14:2.2 : Shareholders of the Target Corporation14-4
- § 14:2.3 : Management of the Target Corporation14-4
- [A] : General Principles14-4
- [B] : The Rollover Shareholders14-4
- § 14:2.4 : Private Equity Firm14-5
- § 14:2.5 : Financial Institution14-6
- § 14:2.6 : Junk Bonds and the A/B Exchange Offer14-8
- § 14:2.7 : Acquisition Vehicle14-11
- [A] : Acquisition of a Stand-Alone Publicly Held Target in an LBO14-11
- [B] : Acquisition of Stand-Alone Privately Held Target in an LBO14-13
- [C] : Acquisition of a Subsidiary in an LBO14-13
- [D] : Ensuring the Deductibility of Interest14-14
- [E] : Potential Inclusion of Reverse Break-Up Fee in the Acquisition Agreement14-14
- [F] : Acquisition Proposal on a Cash-Free, Debt-Free Basis14-15
- § 14:3 : Fiduciary Duty Standard Applicable to the Target’s Board in an LBO14-16
- § 14:4 : Potential Applicability of SEC Rule 13e-3 in an LBO14-16
- § 14:5 : Impact of Fraudulent Conveyance Law on an LBO14-16
- § 14:5.1 : Introduction14-16
- § 14:5.2 : Section 548 of the Bankruptcy Code14-16
- § 14:5.3 : Addressing Fraudulent Conveyance Issues in LBOs14-18
- § 14:6 : Potential Liability of Directors for Making an Illegal Corporate Distribution in an LBO14-20
- § 14:7 : Potential Breach of Implied Covenants in Bond Indenture of Pre-LBO Bondholders and Event Protection14-21
- § 14:8 : Impact of Federal Reserve Margin Regulations on Acquisition Financing in an LBO14-22
- § 14:8.1 : Introduction14-22
- § 14:8.2 : The Junk Bond Ruling14-23
- § 14:9 : Case Study: Hypothetical LBO Based on the RJR Nabisco LBO14-24
- § 14:9.1 : Introduction14-24
- § 14:9.2 : Facts14-24
- § 14:9.3 : The Economic Rationale for the Transaction14-27
- § 14:9.4 : Tax Consequences to the Various Parties to the Transaction14-28
- § 14:9.5 : Accounting Consequences of the Transaction14-28
- § 14:9.6 : Fiduciary Duties of RJR’s Board14-28
- § 14:9.7 : Do the Going Private Rules of the Securities Laws Apply to the Transaction?14-29
- § 14:9.8 : How Does the Board of RJR Address the Risk That the Transaction Could Be a Fraudulent Conveyance?14-29
- § 14:9.9 : How Does the Board of RJR Address the Risk That the Transaction Will Be an Illegal Distribution?14-30
- § 14:9.10 : What Is Likely to Happen to the Value of RJR’s Old Debentures and to Its Preferred Stock As a Result of This Transaction?14-30
- § 14:9.11 : Does This Transaction Comply with the Federal Margin Rules?14-30
- § 14:10 : Leveraged Recapitalization: An Alternative to an LBO14-30
- § 14:11 : Antitrust Challenges to Club Deals14-32
- § 14:12 : Potential Liability of PE Firm Under ERISA for Portfolio Firm’s Withdrawal Liability?
Sun Capital and Palladium14-35
- Appendix 14A : Solvency Opinions in Time’s Acquisition of WarnerApp. 14A-1
- Appendix 14B : Getty Images, Rollover Commitment Letter for Management BuyoutApp. 14B-1
- Appendix 14C : Getty Images, Equity Commitment Letters for Management BuyoutApp. 14C-1
- Appendix 14D : Getty Images, Senior Secured Credit Facilities Commitment Letter for Management BuyoutApp. 14D-1
- Appendix 14E : Pinnacle S-4 Exchange Offer in an “A/B” Exchange for Notes Issued in an LBOApp. 14E-1
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Chapter 15: |
Introduction to Spin-Offs: Tax, Corporate, Securities, and Fraudulent Conveyance Issues; And Appendices 15A-15C |
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- § 15:1 : Scope15-2
- § 15:1.1 : References15-3
- § 15:2 : Federal Income Tax Impact on Spin-Offs15-3
- § 15:2.1 : Introduction15-3
- § 15:2.2 : Types of Section 355 Distributions: Spin-Offs, Split-Offs, and Split-Ups15-4
- § 15:2.3 : Conditions for Tax-Free Treatment Under Section 355(a)15-5
- § 15:2.4 : Elaboration on the Treatment of the Parties If the Conditions Are Satisfied15-6
- [A] : The Treatment of the Shareholders of the Distributing Corporation15-6
- [B] : The Treatment of the Distributing Corporation15-7
- [B][1] : In General15-7
- [B][2] : Potential Gain for the Distributing Corporation Under Sections 355(d) and 355(e)<
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