I. Broad Overview of Course Themes
A. Focus of this course: A practitioners perspective.
1. Discuss why companies engage in mergers, consolidations, and acquisitions.
2. Discuss who is involved in such transactions.
3. Discuss the interplay between law, business, investment banking, and public relations.
4. Discuss the legal context of these transactions.
5. Discuss the technical mechanics of the deal process.
6. Discuss the relationship between the board, management, and shareholders: most importantly legal duties of directors.
B. Mergers and acquisitions are an adversarial process despite civility
1. Each side has different goals, risks, and priorities.
2. Due diligence: Buyers attempt to confirm view of their view of the critical aspects of the seller and the fundamental underlying assumptions.
C. Takeover Defenses.
1. The seller, not the buyer, controls the tempo/pace/nature through defenses.
2. The presence or lack of defenses before the buyer determine how the battle will proceed.
3. Defenses as a negotiating point/leverage for seller.
4. Sellers should have defenses in place as a point of general practice; even if they do not, the law allows flexibility for targets to implement defenses even after a takeover threat emerges.
5. Legal standard for installing takeover defenses is different from actually executing. [Ask Kaplan how these legal standards would play out] D. Protecting the deal from third parties: Lock-Ups
E. Focus on Practice
1. The corporate lawyer is the deal-runner
2. The good lawyer worries a lot about what can go wrong. Also, anticipates the worst-case scenario.
3. The good lawyer knows that every piece of the merger and acquisition process is potentially the topic of future litigation. Everything is possibly in play down to emails and comments.
F. The Public Company
1. Separation of ownership and management.
a. As a result, directors/management are unable to commit the corporation to a transaction. This becomes a huge consideration
2. There is exists a suspicion of management by the owners. Yet, on the other hand, there is a belief that courts are ill-suited to get involved in business decisions.
a. Business Judgmen
ppen in the lapse between signing the Letter of Intent and executing definitive Merger Agreement?
a. Target becomes disoriented. All relationships are potentially compromised.
b. Customers become unsure of target’s position; employees are concerned with their own positions.
c. Brandy equity is damaged.
d. Seller’s stock can go down [after an initial spike after the announcement].
H. Key Issue: Which party should bear the risks during the elapse of time?
1. Which changes are appropriate to buyer and which should be borne by the seller?
2. For example, one of the most important is employees. In different ways, both parties bear risk during the elapse of time.
a. Seller: Employees leave due to the uncertainty and deal falls through, leaving Seller in a less favorable position than before.
b. Buyer: Seller’s employees leave, making the value of Buyer’s investment less favorable.