mergers and acquisitions

As a Valentine’s Day gift to the community, Silicon Valley Bank issued its eighth annual Startup Outlook Report, resulting from a survey of nearly 950 technology and healthcare executives in startups, most based in the US, with additional input from businesses with primary operations in the UK and China. SVB’s survey asked entrepreneurs for their views on access to capital, hiring, general business conditions, public policy issues and other factors relevant to their businesses.  Nearly all of the survey respondents were privately held companies, with the majority in the
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As we mentioned in this post earlier this month, the Delaware Court of Chancery has issued its decision in the matter of In re Trados Incorporated Shareholder Litigation, C.A. No. 1512-VC (August 16, 2013), in which it addresses extensively a variety of issues that directors and investors will want to consider in similar circumstances.  In the opinion, by Vice Chancellor J. Travis Laster, the court found that although the preferred stockholders received all of the merger consideration in an end-stage transaction and the common stockholders received nothing, and although the Trados directors failed to demonstrate that they had followed a fair process, the transaction was still “entirely fair” to the common stockholders because the common stock had no monetary value before the merger.  You can read our detailed alert here by DLA Piper partners John J. Gilluly III and John Reed, which provides background for the case and includes additional detail regarding the four key takeaways from the opinion listed below.
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CONTRIBUTED BY

Criddle.jpg
Kevin Criddle
kevin.criddle@dlapiper.com 
Kappus, Anthony R._photo_4742.jpg
Anthony Kappus
anthony.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 policy dictates otherwise.  This is true in Washington State, where courts have found that contractual rights are generally transferable unless the contract expressly prohibits assignment in “very specific” and “unmistakable terms.”

Exceptions to the General Assignability Rule

The exceptions to the general rule of free assignability fall into two broad categories: (1) contractual prohibitions on free assignability (“anti-assignment clauses”) and (2) case law prohibitions on free assignability of certain types of contracts that arise out of public policy concerns.


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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.
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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 review all of the items requested, the seller’s counsel typically prepares a formal written response to the due diligence request list. This post will focus, from the seller’s perspective, on preparation of such a response.
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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, legal, technical, and financial matters unique to the seller and the deal at hand. This means not only assembling the appropriate legal team, but making sure that the buyer or seller has designated the appropriate in-house contacts to address questions that may arise concerning financial, customer, marketing, technical/engineering, information technology/infrastructure or personnel matters.


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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 ReedCourtney 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
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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.


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Darnell-Weichelt, Kristi Lynn_photo_3835.jpgCONTRIBUTED BY
Kristi Darnell-Weichelt
kristi.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, one entity legally merges into another entity, resulting in the surviving entity holding all of the assets and liabilities of the merged company. As opposed to an asset sale where assets are formally transferred to another company, the “business” in a merger transaction is acquired by operation of law. Similarly, unlike a direct purchase of stock from a company’s stockholders, a merger transaction typically does not require 100% approval by the target company’s stockholders (the actual approval threshold will be dictated by applicable state law, the target company’s charter documentation, and the terms negotiated into the merger agreement by the buyer and seller).


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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.


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