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.