For the past several years Cleary Gottlieb has published legal and practical information regarding German public M&A transactions. For the new edition of the compilation Public Bids and Squeeze-Outs in Germany, a Statistical Survey (2002 – 2016), we have collected and analyzed information related to public bids and squeeze-outs in Germany from January 2002 through December 2016. Continue Reading Public Bids and Squeeze-Outs in Germany, a Statistical Survey (2002-2016)
U.S. and European companies continue to receive bids to sell themselves and their significant assets to companies based in the People’s Republic of China. Evaluation of these proposals requires due diligence of the acquiror’s ownership structure, assets, cash position, and financing sources. Moreover, even if this due diligence exercise gives rise to satisfactory results, the continued unpredictability of the PRC government (including its recently enhanced foreign exchange control measures), coupled with the ties of some of these buyers and financing sources to governmental entities in the PRC, as well as the challenges that a non-PRC counterparty faces when seeking to enforce contractual obligations and non-PRC judgments in PRC courts, merit the implementation of an array of innovative provisions in M&A Agreements to protect the seller/target. Several months ago, we reviewed these provisions in a popular post. This new post updates that earlier post to reflect recent regulatory developments and the evolution of market practice. Continue Reading An Updated Look at How M&A Agreements Handle the Risks and Challenges of PRC Acquirors
In 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-01, which adopts a new standard that will require companies to generally change the way they account for equity investments of less than 20%. Continue Reading Accounting for Minority Equity Investments: A Small Change with Significant Implications
Investors frequently negotiate for a redemption right to ensure at least some return on preferred stock investments in a “sideways situation”—where the target company is neither a huge success nor an abject failure. Continuing a consistent theme in recent Delaware jurisprudence, the Delaware Court of Chancery declined to dismiss a complaint alleging directors breached their duty of loyalty in taking steps to satisfy an investor’s redemption request.
When a corporation sells corporate assets to its (or an affiliate of its) controlling stockholder, Delaware courts generally will review that transaction under the exacting “entire fairness” standard. But what if the corporation’s minority stockholders are given the opportunity to participate along with the controlling stockholder in the purchase of the corporate assets pro rata to the extent of their stock ownership? Continue Reading Chancery Court Suggests that Rights Offerings May Limit Liability in Transactions with Controlling Stockholders
The Delaware Supreme Court has affirmed the Delaware Court of Chancery’s ruling that Energy Transfer Equity L.P. (“ETE”) did not breach its agreement to merge with The Williams Companies, Inc. when ETE terminated the agreement on the grounds that its counsel was unwilling to deliver a tax opinion that was a condition to closing.
While the court’s decision has been eagerly anticipated, the larger impact of the ETE/Williams matter occurred back in May 2016 when the dispute became public: the dispute highlighted that tax-opinion closing conditions which are intended to protect the parties against tax risks could instead add to deal risks.
This alert memorandum briefly describes the facts in the case and the court’s decision, and then turns to a survey of what deal counterparties have been doing differently to mitigate “ETE/Williams risk”. We end with a menu of features deal counterparties should consider using in future deals. These features include:
— No tax opinion required
— Tax opinions prepared before signing
— Closing condition limited to change in tax law
— Obligation to accept opinion from other party’s counsel or an alternate counsel
— Obligation to restructure if necessary to obtain tax opinion
— Termination fee for termination because of inability to obtain opinion
Please click here to read the full alert memorandum.
Several amendments were made to Section 251(h) of the Delaware General Corporation Law that became effective for merger agreements entered into on or after August 1, 2016. Section 251(h) permits acquisitions of publicly listed Delaware corporations to be accomplished via a tender offer without the need to approve the second-step “squeeze-out” merger at a stockholder meeting if certain conditions are met, including that the acquiror of the tendered shares and its affiliates would be able to unilaterally approve the second-step merger if a meeting were to be held. Continue Reading Smoothing the Pathway to Use of Tender Offers in Private Equity Acquisitions
Appraisal rights in public M&A transactions have recently garnered greater attention, particularly in Delaware. As a result, more attention is being paid to the possible inclusion of a closing condition protecting the acquiror against excessive use of appraisal rights, and this should lead to careful attention being paid to the negotiation and drafting of any such conditions and related provisions. Discussed below are some of the reasons for this greater attention, and suggestions regarding negotiating and drafting such provisions. Continue Reading Negotiating Appraisal Conditions in Public M&A Transactions
Shareholder activists, and the institutional investors who are increasingly supporting them, continue to press public company boards to take bold steps to unlock the value contained in their various businesses. While some companies may have assets or business lines ripe for divestiture or spin off, targets of shareholder activism are often resistant to the clarion call to the “pure play” evolution process – and for good reason. For many companies, in particular in the technology, media and telecommunications (TMT) space, maintaining diverse business lines can serve a strategic purpose despite different growth trajectories, profitability and trading multiples. Furthermore, the spin-off/divestiture route may pose other challenges – such as the embryonic nature of a new division, the absence of sufficiently developed operations to be a full-fledged standalone company, adverse tax consequences of a separation or a desire to maintain control – which make a spin-off or divestiture undesirable or untimely. Continue Reading Is Tracking Stock, Often Considered a Bygone Darling of the 90’s Tech Boom, in Line for a Comeback?
Recently released proposed regulations that would classify certain intragroup loans as equity for U.S. tax purposes could have very significant consequences for M&A transactions, private equity investments and restructurings. If adopted in their present form, the proposed regulations would eliminate strategies that have been widely used in cross-border transactions. However, the proposal could also have unpredictable consequences for the day-to-day funding practices of both U.S. and foreign-owned multinational groups. Moreover, the proposal would impose burdensome documentation and substantiation requirements on intragroup loans as a necessary condition to having the loans respected as debt for tax purposes (regardless of whether as a legal and economic matter the loans are debt). Continue Reading Not Just Inversions: Proposed Changes in the Tax Treatment of Related-Party Debt Will Affect M&A Transactions, Restructurings and Financings