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.
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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).
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The Pension Benefit Guaranty Corporation’s (the “PBGC”) widely reported[1] recent settlement agreement with The Renco Group, Inc. (“Renco”) illustrates the risks inherent in pursuing certain transactions where underfunded pensions are present.  Among the highlighted risks is the potential for the joint and several liability provisions of federal pension law[2] to enable the PBGC to reach for assets unrelated to a pension plan sponsor’s business, including personal assets of controlling persons, to satisfy underfunded pension claims.

Based on published reports, the Renco settlement, after a trial but before a decision was handed down by the Federal court in New York, is unusual in three respects.  First, the PBGC returned the plans at issue to Renco – that is, “restored”[3] the plans – rather than negotiating for Renco or an affiliate to make payments to improve the plans’ funded status.[4]  Second, the situation involves a rare instance in which the PBGC has pursued a litigation on the basis of a claim under Section 4069 of ERISA, the anti-evasion section of the pension termination provisions of ERISA.  Third, the PBGC used the controlled group joint and several liability provisions of ERISA to assert claims against entities that are not involved in the steel business but that are controlled by Renco and its controlling shareholder Ira Rennert.  While the PBGC has on many occasions used the controlled group liability provisions of ERISA to reach controlled group affiliates that are in separate lines of business from the plan sponsor, the facts in Renco are reminiscent of the PBGC’s lengthy fight with Carl Icahn beginning in the early 1990’s over responsibility for TWA’s underfunded pension obligations.[5]
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Companies based in the People’s Republic of China have committed to over $100 billion of overseas acquisitions since January 1, 2016, including a number of high profile targets in the United States and Europe.[1] The ties of these buyers to governmental entities in the PRC, coupled with the unpredictability of the PRC government, and the challenges that a non-PRC counterparty faces when seeking to enforce contractual obligations and non-PRC judgments in PRC courts has led practitioners to implement an array of innovative provisions in M&A Agreements.
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The past few years have witnessed a resurgence in the mergers and acquisitions and initial public offering markets—particularly for health care. Many private companies have pursued a dual-track M&A/IPO process, in which the company simultaneously pursues an IPO and a confidential sale. The dual-track process has been growing in popularity among health care companies, since the IPO process can be helpful in generating momentum for a potential sale in a consolidating industry.
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In the latest turn in the long-running LBO-related fraudulent conveyance litigation brought in connection with the Lyondell bankruptcy,[1] on November 18, 2015, Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York (the “Court”) issued a decision (the “Decision”) on motions to dismiss the intentional fraudulent transfer claims and the state-law constructive fraudulent transfer claims brought by representatives for shareholders of Lyondell Chemical Company (“Lyondell”) against Edward Weisfelner (the “Trustee”), trustee of two trusts established for Lyondell’s creditors.  In re Lyondell Chem. Co., No. 09-10023 (REG), 2015 WL 7272996 (Bankr. S.D.N.Y. Nov. 18, 2015).  The Decision dismissed the intentional fraudulent transfer claims based on the failure to adequately plead the Lyondell Board’s intent to defraud the company’s creditors by entering into the leveraged buyout.  However, the Court left in place the state-law constructive fraudulent transfer claims against former shareholders – notwithstanding securities safe harbors in the Bankruptcy Code that would generally preclude such claims – and, in the process, demarcated the boundaries between intentional and constructive fraudulent transfer claims.
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Valeant’s hostile bid for Allergan was one of 2014’s most discussed takeover battles.  The situation, which ultimately resulted in the acquisition of Allergan by Actavis plc, included a novel structure that involved a “partnership” between Valeant and the investment fund Pershing Square.  In particular, a Pershing Square-controlled entity having a  small minority interest owned by Valeant, acquired shares and options to acquire shares constituting more than nine percent of Allergan’s common stock.  Such purchases were made by Pershing Square with Valeant’s consent and with full knowledge of Valeant’s intentions to announce  a proposal to acquire Allergan.  Pershing Square and Valeant then filed a Schedule 13D and Pershing Square then supported Valeant’s proposed acquisition.  Ultimately Pershing Square made  a very substantial profit on its investment when Allergan was sold to Actavis.
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I. The German M&A Market – a Seller’s Market

Germany has long been an attractive market for both strategic and financial investors. This is due to a number of reasons. The German economy is traditionally shaped by highly regarded blue chips with strong brand recognition and “quality perception” as well as successful small and medium-sized companies (Mittelstand), many of them global market leaders in industrial niche markets. Germany is also considered as – and continues to prove itself to be – a stable and solid hub in a European market environment that, due to the never-ending Euro crisis, the Crimea/Ukraine crisis and other crises, has not ceased to be turbulent and volatile. More recently, the USD/EUR exchange rate has added to Germany’s attractiveness for inbound M&A transactions.
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This article was originally published in The M&A Lawyer, Vol. 19, Issue 7.

So-called representation and warranty insurance (“RWI”) has been an often-discussed innovation in M&A circles for several years, with seemingly perpetual speculation that a mature market for the product is just over the horizon. In the last few years, however, M&A practitioners have seen a notable increase in the number of policies priced and bound. A number of factors have led to this increase, including improvement in the pricing of policies by carriers against historical levels, expansion of coverage terms by carriers that bring the policies’ terms closer to a traditional seller indemnity and buyers’ increasing familiarity with the product and increasing comfort in carriers’ track records in paying claims, not to mention the general rebound in M&A activity since the recession.
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In a recent Delaware Chancery Court decision, Vice Chancellor Laster considered yet another challenge to the approval by a “conflicts committee” of a master limited partnership (“MLP”) in the energy sector of a transaction with the MLP’s parent company. Although the Vice Chancellor noted criticism of the process undertaken by the conflicts committee as portrayed in the complaint by holders of the publicly-traded  units of the MLP, the Court nonetheless dismissed the complaint due to the limited ability to challenge the transaction under the partnership agreement (which was typical for MLPs).
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