Mergers and AcquisitionsA Step-by-Step Legal and Practical Guide
Wiley Finance 2. Aufl.
The legal, financial, and business primer to the M&A process Mergers and Acquisitions offers accessible step-by-step guidance through the M&A process to provide the legal and financial background required to navigate these deals successfully. From the initial engagement letter to the final acquisition agreement, this book delves into the mechanics of the process from beginning to end, favoring practical advice and actionable steps over theoretical concepts. Coverage includes deal structure, corporate structuring considerations, tax issues, public companies, leveraged buyouts, troubled businesses and more, with a uniquely solution-oriented approach to the M&A process. This updated second edition features new discussion on cross-border transactions and "pseudo" M&A deals, and the companion websites provides checklists and sample forms to facilitate organization and follow-through. Mergers and acquisitions are complex, and problems can present themselves at each stage of the process; even if the deal doesn't fall through, you may still come out with less than you bargained for. This book is a multi-disciplinary primer for anyone navigating an M&A, providing the legal, financial, and business advice that helps you swing the deal your way. Understand the legal mechanics of an M&A deal Navigate the process with step-by-step guidance Compare M&A structures, and the rationale behind each Solve common issues and avoid transactional missteps Do you know what action to take when you receive an engagement letter, confidentiality agreement, or letter of intent? Do you know when to get the banker involved, and how? Simply assuming the everything will work out well guarantees that it will—for the other side. Don't leave your M&A to chance; get the information and tools you need to get it done right. Mergers and Acquisitions guides you through the process step-by-step with expert insight and real-world advice.
Preface xi Acknowledgments xv CHAPTER 1 Structuring Fundamentals 1 Basic Corporate Finance Concepts 1 Reasons for Acquisitions 7 Three Basic Acquisition Structures 11 Structuring Considerations: Overview 14 CHAPTER 2 The Acquisition Process 20 Overview 20 Valuation of the Business 27 Investment Bank Engagement Letters 30 Confidentiality Agreements 35 Letters of Intent 37 Stay Bonuses and Other Employee Retention Arrangements 39 Business and Legal Due Diligence 42 Intellectual Property Due Diligence 55 From Signing to Closing 66 Appendixes 67 CHAPTER 3 Corporate (Nontax) Structuring Considerations 69 Business Objectives and Other Nontax Structuring Considerations 69 Acquisition Structure Diagrams 78 Forms of Acquisition Consideration 78 Debt 83 Cash, Stock, and Earnouts 96 Successor Liability and the De Facto Merger Doctrine 101 Securities Law Compliance 104 Antitrust Compliance: Hart-Scott-Rodino Act 114 Equity Compensation 120 Incentive Stock Options 126 Employment Agreements and Noncompetition Covenants 130 Indemnification 136 Employment and Benefits Law 138 Acquisition Accounting 140 Recapitalization Accounting 144 Appendixes 145 CHAPTER 4 Tax Considerations 146 Taxable Versus Tax-Free Transactions: Overview of Relevant Situations 146 Detailed Analysis of the Positions of the Target and Its Owners and of the Buyer 148 Taxable Transactions and Their Tax Effects 150 Tax-Free Transactions 154 Special Situations 159 Golden Parachute Tax 164 CHAPTER 5 The Definitive Acquisition Agreement 169 Economic Terms 169 Representations and Warranties 184 Covenants 196 Additional Agreements 199 Conditions to Closing 200 Survival of Representations and Indemnification 201 Termination 206 Miscellaneous 206 Representing Targets: A Summary 207 Appendixes 210 CHAPTER 6 Acquisitions of Public Companies 211 Public-to-Public Mergers: What is Different? 211 Case Law–Developed Fiduciary Duties and Standards of Review 214 Evolution of Fiduciary Duty Case Law and Judicial Review 220 Securities Laws and Public Company Acquisitions 237 Anti-Takeover Devices 247 Appendix 256 CHAPTER 7 Leveraged Buyouts (Structural and Tax Issues) and Acquisitions of a Troubled Business (Creditors’ Rights and Bankruptcy) 257 Leveraged Buyouts: Structural and Tax Issues 257 Acquisition of a Troubled Business Generally 263 Fraudulent Transfers 265 Acquisitions Out of Bankruptcy 272 CHAPTER 8 International M&A 282 Cross-Border Acquisitions 282 CHAPTER 9 Joint Ventures 292 Reasons for Joint Ventures 292 Types of Joint Ventures 293 Typical Joint Venture Terms 295 Appendix 304 About the Website 305 Index 307
EDWIN L. MILLER, JR. is a partner with Sullivan & Worcester. He has practiced corporate and securities law for over forty years. He has represented both issuers and underwriters in numerous IPOs, secondary stock offerings, and other public market transactions. In addition, he has organized a number of private equity/venture capital funds and has represented venture capital firms and technology companies in venture financings. LEWIS N. SEGALL is a corporate partner and leader of the Corporate/M&A Group at Sullivan & Worcester. He regularly represents public and private companies in equity and debt financings, joint ventures, domestic and international mergers and acquisitions, and general corporate matters. He also represents financial institutions in secured and unsecured credit facilities.
Getting mergers and acquisitions transactions successfully completed requires an understanding of the legal framework, negotiating points, and practical aspects of each stage of the deal. M&As are complex undertakings with lots of moving parts and no end of tricky twists and turns at every stage of the process. This is why, no matter what your role in an M&A, it behooves you to learn as much as you can about their mechanics before entering into such arrangements—or you could come out of it with a lot less than you'd bargained for. Fortunately, Mergers and Acquisitions, Second Edition makes it easier than ever for you to quickly get up to speed on all the M&A basics. Part legal primer, part business and negotiating how-to, it provides comprehensive, easy-to-digest insights, advice, and guidance for managers, investors, attorneys, and business professionals. Attorneys Edwin Miller and Lewis Segall draw upon their decades of experience orchestrating M&As in both the public and private spheres to school you in the mechanics of M&As. Taking a multidisciplinary, solution-oriented approach, they walk you step by step through the entire process, filling you in on what you need to know about finance fundamentals, structuring transactions, tax considerations, leveraged buyouts, acquiring troubled businesses, and much more. New to this edition of the critically acclaimed guide are discussions of cross-border transactions and quasi-M&A deals like joint ventures, and a companion website providing checklists and sample forms to facilitate organization and concrete understanding. From the initial engagement letter to the final acquisition agreement, Mergers and Acquisitions, Second Edition arms you with the knowledge and tools you need to successfully navigate the M&A process and come out of it with everything you bargain for.
Praise for Mergers and Acquisitions "Buyers and sellers both hope to be winners in an acquisition. But at the negotiating table, there is only one winner for each point and winning may mean a significant change in the deal economics. The insights in this book are crucial for both buyers and sellers and lay out the rationale for both sides of all of the money issues and other important deal points." —Todd Koopersmith, Senior Vice President, Corporate Development, Iron Mountain "This book will help M&A professionals get up to speed on a wide range of deal points. It explains the legal background and transaction structuring issues in M&A transactions that every investment professional must know." —Gregory Burkus, Founder and Partner, Shasta Partners "This book is an essential resource for businesspeople, and the lawyers and other professionals who advise them, to develop a real-world understanding of how the M&A process works. More importantly, it explains why specific deal structures, contractual terms, and diligence procedures are used." —Jonathan Wolfman, Partner, WilmerHale, Boston "As U.S. M&A concepts, documents, and practices become increasingly adopted internationally, this book will be an invaluable resource. It provides an excellent overview of the entire area, and is easily understandable by corporate executives and lawyers outside the United States." —Leo Specht, Founder, Specht Rechtsanwalts-Gesellschaft mbH, Vienna, Austria