The Venture Alley - A blog about business and legal issues important to entrepreneurs, startups, venture capitalists and angel investors.

CONTRIBUTED BYMegan Muirmegan.muir@dlapiper.com  The 2013 Private Equity Survey of McGladrey, done by the research unit of SourceMedia, indicates growth and optimism in the PE sector although the funds remain cautious about the broader economy.  Some findings of the 2013 survey: Funds see "management capabilities and effective strategy and execution as primary drivers of successful portfolios." Outdated IT systems, under-qualified IT personnel and inadequate infrastructure become apparent following acquisitions, often impacting critical areas of the business. Active integration leadership and experienced team members are important to success. Firms frequently find weaknesses in financial reporting (including the frequency, accuracy and efficiency of... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com On February 22, 2013, in its Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH decision, the Delaware Court of Chancery held that a reverse triangular merger is not an assignment by operation of law, meaning that licensor consent is not required for the surviving entity to retain the target company’s rights, benefits and obligations under an existing technology license. For background, in a prior post, we discussed the impact of common M&A structures, as well as the impact of common anti-assignment provisions, on the assignability of contracts of the target company (in other words, whether or not the... More

CONTRIBUTED BY Kevin Criddlekevin.criddle@dlapiper.com    Anthony Kappusanthony.kappus@dlapiper.com One of the key considerations in structuring merger and acquisition (M&A) transactions is determining which contracts of the target company, if any, will remain in effect for the acquiror following closing.  This post will briefly outline: (1) the general rules of contract assignment; (2) the effect of anti-assignment clauses and other exceptions to the general rule of assignability; and (3) the effect of four common M&A structures on contract assignment. General Rule: Contracts are Freely Assignable The general rule is that contracts are freely assignable unless the contract itself, a statute, or public... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com This post is part five of our five part series exploring various aspects of due diligence in the context of a merger and acquisition (M&A) transaction. Our prior posts discussed M&A due diligence generally and its objectives, described the due diligence process, outlined considerations when assembling your due diligence team of experts and the due diligence request list, and explained how to respond to a due diligence request list. This post will focus on the scope and process of a due diligence review and how the results of such review will impact the proposed M&A transaction.... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com This post is part four of our series exploring various aspects of due diligence in the context of a merger and acquisition (M&A) transaction. Our prior posts discussed M&A due diligence generally and its objectives, described the due diligence process and outlined considerations when assembling your due diligence team of experts and the due diligence request list. As indicated in our earlier post, the due diligence request list is the inventory of documents requested, provided and reviewed on the road to completing an M&A transaction. Once the seller and its counsel have had the chance to collect and... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com This post is part three of our series exploring various aspects of due diligence in the context of a merger and acquisition (M&A) transaction. Our prior posts discussed M&A due diligence generally and its objectives and described the due diligence process. This post will focus on assembling your due diligence team of experts and the due diligence request list. Building your due diligence team of experts Every deal is different, and one of the first priorities in the due diligence process is to assemble a diverse due diligence team. The team’s collective expertise should cover the various business,... More

The Delaware Court of Chancery recently awarded $1.2 billiion in a matter alleging breach of the duty of loyalty by a controlling stockholder in a merger.  In a recent publication, our colleagues Robert W. Brownlie, John Reed, Courtney Stewart, and Jennifer A. Lloyd, describe the case and suggest approaches to keep in mind in similar circumstances as follows: The Delaware Court of Chancery, in the recent decision In re Southern Peru Copper Corp. Shareholder Derivative Litigation, 30 A.3d 60, (Del. Ch. 2011), has awarded US$1.2 billion in damages (plus interest from the merger date to judgment and payment) after finding the controlling stockholder... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com This post is part two of our series exploring various aspects of due diligence in the context of a merger and acquisition (M&A) transaction. Our prior post discussed M&A due diligence generally and its objectives. This post will focus on the due diligence process. Due diligence is routinely time consuming and often complex. However, the process can be manageable and cost-effective if a party spends time in advance creating a due diligence plan and forming a due diligence team.... More

CONTRIBUTED BYKristi Darnell-Weicheltkristi.darnell@dlapiper.com As highlighted in an earlier post, there are a number of factors both buyers and sellers of companies should consider when structuring a purchase and sale transaction. If a buyer and seller have decided to pursue a merger structure (as opposed to, for example, an asset sale, or a purchase of all of the stock of a company directly from the company’s stockholders, each of which has different liability exposures and tax implications), there is still another level of analysis that will need to be performed regarding the actual structure of the merger. In all merger transactions,... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com Our colleague Mimi Hunter recently summarized the basic aspects of due diligence in the context of a venture capital investment (What is due diligence?). In this series of posts, I will highlight considerations for due diligence in the context of a merger and acquisition (M&A) transaction.  M&A due diligence generally The term “due diligence” describes the process each of the parties undertakes to investigate the other before a final decision is made whether to proceed with the transaction.... More

CONTRIBUTED BYMegan Muirmegan.muir@dlapiper.com  A new M&A Corporate Development Report from Merrill DataSite and mergermarket was released this past week.  It addresses the M&A outlook for the coming year.  They report finding a largely positive view toward M&A deal volume and deal values for the upcoming 12 months, with 76% of the corporate executives and investment bankers interviewed anticipating increasing deal volume and 65% of them expecting deal values to increase in the same period. The report also includes responses regarding approaches to corporate development within the organizations of the executives interviewed, with half of the executives reporting that corporate development executives... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com Earlier this week, I attended the TechNW 2011 conference organized by the Washington Technology Industry Association (WTIA). The conference was very informative and full of interesting presenters and topics. The corporate development panel discussion moderated by Tom Huseby (General Partner and founder of SeaPoint Ventures) was particularly interesting for startups (and relevant to my practice). The panelists were Neeraj Arora (Principal, Corporate Development at Google), Ryan Aytay (VP of Corporate Development at Salesforce.com), Ryan Cooper (Corporate Development Director at Microsoft), and Amin Zoufonoun (Director of Corporate Development at Facebook), all companies that have grown a great deal through partnerships... More

CONTRIBUTED BYMegan Muirmegan.muir@dlapiper.com  This past week, mergermarket and Merrill Datasite released their report: Deal Drivers 2011 Half Year Report for the North American Region, providing an overview of January through June 2011 M&A activity.  M&A deals in the region have increased in volume by 51% (to 1,894 deals) and in value by 47% (for a total of US $526.6 billion) compared to the same period in 2010.  Volume was highest in the technology, media and telecom sector with nearly 350 announced transactions, while energy, mining, oil and gas deals were on top in terms of dollar value at US $160 billion. ... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com Last week, the Delaware courts (Chancellor Strine) provided some interesting guidance for those concerned about time-limiting reps and warranties in purchase/merger agreements. The issue raised is whether a time-limited rep/warranty combined with express termination language (i.e., a rep/warranty that survives for one year from closing then terminates along with any remedy for breach) effectively operates to shorten the statute of limitations on claims. Courtesy of John Reed, a partner in DLA Piper’s Delaware office, below is a brief summary of the case and a few key takeaways. The full text of the case is available here: GRT, Inc. v. Marathon GTF Technology, Ltd.,... More

CONTRIBUTED BYMegan Muirmegan.muir@dlapiper.com  The Q1 2011 mergermarket report on global M&A activity is out.  Highlights of the report, produced in conjunction with Merrill Corporation, include the following: There have been 2,749 M&A transactions worth a combined US$617.1bn (through April 2011); Energy sales make up the largest deal value (26.4% of global deal value); The Telecom space is undergoing consolidation, with some large value deals announced; and The private equity market is very active.  In the first quarter of 2011, 446 buyouts and 264 sales have occurred, with each in the US$55bn range.... More

The Future of M&A, the mergermarket and Merrill DataSite report released earlier this month, reflects a strong expectation of increased merger activity in 2011 and 2012.  The technology, media, and telecom sectors are expected to see a significant increase in merger activity, along with energy/utilities. The report, based upon interviews conducted in the fourth quarter of 2010, also indicates a growing sense that the valuation gap between buyers and sellers is narrowing, along with more optimism regarding financing alternatives.  Silicon Valley Bank has a new M&A report out as well, Private Life Science M&A Analysis: More Structured Deals and Quicker Exits in... More

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com   This morning John Cook of GeekWire reported on the Q1 2011 DowJones VentureSource study indicating that US venture-backed company M&A activity is dropping.  Here is a comment that I left on John’s post regarding our perspective on such trends:... More

CONTRIBUTED BYTyler Hollenbecktyler.hollenbeck@dlapiper.com   Although valuation is obviously the most critical variable in an exit event, the structure of the transaction can also have significant (and often surprising) effects on the consideration ultimately received by the sellers’ shareholders. Moreover, the buyer’s interests will generally be directly adverse to those of the seller with respect to deal structure. This is particularly true in deciding between an asset sale and a stock sale, where parties often adjust other elements of the deal (including valuation) in order to accommodate one side’s preferred structure. Accordingly, understanding the following three basic drivers of the asset... More