VCs are exposed to unique challenges and risks when selling portfolio companies, and what is acceptable from a company's perspective may not be optimal for the investor base. An understanding of what goes wrong after companies are sold helps investors focus on effective planning strategies to protect returns and minimize exposure of their funds after closing.
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
Part of the webinar series: M&A Boot Camp 2021
See more at https://www.financialpoise.com/webinars/
Structuring and Planning the M&A Transaction (Series: Private Company M&A Boo...Financial Poise
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/structuring-and-planning-the-ma-transaction-2020/
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions ...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the Bankruptcy Code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. For 2021, professionals must also understand the impact that the economic programs enacted under the CARES Act may have on purchasing such assets. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2021/
Risk intelligence: How to reliably mitigate transaction risk and secure clean...Graeme Cross
This risk intelligence white paper is part of a series of publications from Aon Strategic Advisors & Transaction Solutions (ASATS). The series focuses on risk management and mitigation and is specifically created to help:
• Chief executives and corporate management board members pursuing growth strategies through M&A, or divesting
• Corporate tax managers, development officers and legal counsel responsible for planning, overseeing and / or delivering planned value from M&A
• Chief executive and chief financial officers of private-equity backed portfolio companies
• Private equity executives, portfolio managers and risk officers
• Corporate finance, accounting, tax and legal advisors servicing corporate and private
equity clients
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions:...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the bankruptcy code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2020/
Part of the our current series of Professional Briefings for Owner/Managers of SMEs, the December briefing covered the "Dark art" of business valuation.
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
Part of the webinar series: M&A Boot Camp 2021
See more at https://www.financialpoise.com/webinars/
Structuring and Planning the M&A Transaction (Series: Private Company M&A Boo...Financial Poise
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/structuring-and-planning-the-ma-transaction-2020/
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions ...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the Bankruptcy Code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. For 2021, professionals must also understand the impact that the economic programs enacted under the CARES Act may have on purchasing such assets. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2021/
Risk intelligence: How to reliably mitigate transaction risk and secure clean...Graeme Cross
This risk intelligence white paper is part of a series of publications from Aon Strategic Advisors & Transaction Solutions (ASATS). The series focuses on risk management and mitigation and is specifically created to help:
• Chief executives and corporate management board members pursuing growth strategies through M&A, or divesting
• Corporate tax managers, development officers and legal counsel responsible for planning, overseeing and / or delivering planned value from M&A
• Chief executive and chief financial officers of private-equity backed portfolio companies
• Private equity executives, portfolio managers and risk officers
• Corporate finance, accounting, tax and legal advisors servicing corporate and private
equity clients
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions:...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the bankruptcy code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2020/
Part of the our current series of Professional Briefings for Owner/Managers of SMEs, the December briefing covered the "Dark art" of business valuation.
A deposit is a pre-agreed instalment towards the purchase price in a sale contract.
The Courts have held that the 2 functions of a deposit are to be:
- an earnest commitment to bind the bargain, which means a deposit acts as an indication the Buyer is serious in carrying out the bargain; and
- a guarantee of due performance, that is security of the performance.
A deposit is usually paid at or upon shortly upon the buyer’s signing of the contract.
Usually, a deposit should be no more than 10% of the total purchase price, and commonly may be less. Note: there is no specific laws on that deposit percentage amount per se*.
The other practical, commercial and financial reasons for why a deposit is useful:
> Often the seller will incur not-insignificant fees and expenses (e.g. sale preparatory work and undergoing due diligence, applying to lessor for consent to assignment of lease etc), independent of whether the actual contract proceeds to settlement or completion. So may be also used to partially-compensate for some of those costs incurred If the buyer ultimately walks away”.
> Loss of potential, other sale opportunities during the express or implied exclusivity period during the conditions precedent of sale contract. This could be months or longer
> It's good to have the buyer show it has “skin in the game” by having such "hurt money" put upfront on & the table.
Tip: Even with the best of Confidentiality Deeds/NDAs , the deposit helps reinforce the value and proprietary nature of the seller’s business or entity.
> Not uncommonly, the Buyer entity may be newly-established . Therefore, if there is default or repudiation, even if they are subsequently pursued by the seller, the Buyer may not have any actual capitalisation to be realised against!
> Lastly, if a buyer or won’t (or can’t!?) put up even the deposit, then you should have serious concerns about their financial capacity to commit all the way through the transaction.
Investing in Residential & Multi-Family Real Estate (Series: Real Estate Inve...Financial Poise
Apartment buildings and other residential and multi-family housing can provide a stable income to an investor. This Financial Poise webinar discusses some of the pros and cons of being a landlord. It provides a basic overview about how to find and assess opportunities, obtain financing, negotiate a deal, and manage a multi-family investment. The accounting, tax, and legal aspects of being a landlord are part of the discussion.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/investing-in-residential-multi-family-real-estate-2020/
What Kind of Loan? (Series: Business Borrowing Basics)Financial Poise
In a broad sense, most loans can be divided into two basic types: an asset-based loan (ABL) and a cash flow loan.
An ABL is made by a lender who underwrites the loan primarily by valuing the company’s assets, such as accounts receivable (A/R) and inventory. An ABL lender underwrites a loan based on the ability to liquidate its collateral should it need to. A “cash flow” lender, in contrast, while also secured against the borrower’s assets, underwrites the loan primarily based on the cash flow and general credit-worthiness of the borrower.
The distinction between these types of loans is only the beginning of understanding the many types of loans available to a business, because within each of the two types there are many subtypes.
This webinar takes the audience through a guided tour of the various borrowing options available to businesses, from both a business and legal perspective, to paint the overall landscape of the different types of lenders that exist and to provide a framework for understanding what type of lender and loan may make sense for any particular borrower.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/what-kind-of-loan-2021/
Eddie Lampert bought Kmart out of bankruptcy. W.L. Ross made a fortune many times over buying steel and other companies out of bankruptcy. Hedge funds and other distressed debt traders buy and sell millions of dollars of distressed securities and bankruptcy claims every day. A number of private equity funds focus exclusively on buying distressed businesses, fixing, and selling them. And fortunes are made when real estate crashes by those who have the dry powder to swoop in and buy when others are forced to sell. This webinar explains how to loan to, or purchase the debt of, a company in order to acquire it (a strategy commonly called “loan to own”); how to learn about opportunities involving distressed companies; and tips and best practices for participating in bankruptcy, Article 9, and other sales of distressed businesses (including the concept of serving as the “stalking horse).
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/opportunity-amidst-crisis-buying-distressed-assets-claims-and-securities-for-fun-profit-2020/
"How to maximize your potential to attract US capital" by John Bautista TheFamily
By John Bautista, Partner at Orrick.
Join us IRL next time! http://meetup.com/thefamilyspecialevents
The contents of this video are intended for general information purposes only and should not be considered or construed as legal advice. The distribution of this presentation or its content is not intended to create, and receipt of it does not constitute, an attorney-client relationship. (The views set forth herein are the personal views of the presenters and do not necessarily reflect those of Orrick, Herrington & Sutcliffe.)
Key & Common Negotiated Provisions - Part 1 (Series: PRIVATE COMPANY M&A BOOT...Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. Episodes 3 and 4 of this series explain specific, common provisions and discuss how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Between Episodes 3 and 4, topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financialpoisewebinars/on_demand_webinars/common-negotiated-provisions-part-1/
Eye of the Tiger: Preparing to Sell Your BusinessNow Dentons
This presentation outlines the role of legal counsel in the acquisition process, pre-sale due diligence, important strategic issues in selling your business, as well as tax considerations related to the sale of a business.
How to Position Your Startup for Venture Capital Fundingideatoipo
During this webinar you will learn the basics of the venture model and path along with the necessary steps to take so that your company’s legal structure is an attractive investment. The discussion will cover:
1. Why a Delaware C-Corp is the most-common structure
2. How to document the relationship of the founders and early employees
3. The typical funding stages of a successful startup
4. An overview of convertible debt and SAFEs
5. Why it’s critical to run pro forma cap tables before financings
6. What happens in a venture financing
7. Why compliance with securities laws is important
8. Common legal mistakes in raising capital
9. And much, much more
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
Part of the webinar series: M&A BOOT CAMP - 2022
See more at https://www.financialpoise.com/webinars/
A deposit is a pre-agreed instalment towards the purchase price in a sale contract.
The Courts have held that the 2 functions of a deposit are to be:
- an earnest commitment to bind the bargain, which means a deposit acts as an indication the Buyer is serious in carrying out the bargain; and
- a guarantee of due performance, that is security of the performance.
A deposit is usually paid at or upon shortly upon the buyer’s signing of the contract.
Usually, a deposit should be no more than 10% of the total purchase price, and commonly may be less. Note: there is no specific laws on that deposit percentage amount per se*.
The other practical, commercial and financial reasons for why a deposit is useful:
> Often the seller will incur not-insignificant fees and expenses (e.g. sale preparatory work and undergoing due diligence, applying to lessor for consent to assignment of lease etc), independent of whether the actual contract proceeds to settlement or completion. So may be also used to partially-compensate for some of those costs incurred If the buyer ultimately walks away”.
> Loss of potential, other sale opportunities during the express or implied exclusivity period during the conditions precedent of sale contract. This could be months or longer
> It's good to have the buyer show it has “skin in the game” by having such "hurt money" put upfront on & the table.
Tip: Even with the best of Confidentiality Deeds/NDAs , the deposit helps reinforce the value and proprietary nature of the seller’s business or entity.
> Not uncommonly, the Buyer entity may be newly-established . Therefore, if there is default or repudiation, even if they are subsequently pursued by the seller, the Buyer may not have any actual capitalisation to be realised against!
> Lastly, if a buyer or won’t (or can’t!?) put up even the deposit, then you should have serious concerns about their financial capacity to commit all the way through the transaction.
Investing in Residential & Multi-Family Real Estate (Series: Real Estate Inve...Financial Poise
Apartment buildings and other residential and multi-family housing can provide a stable income to an investor. This Financial Poise webinar discusses some of the pros and cons of being a landlord. It provides a basic overview about how to find and assess opportunities, obtain financing, negotiate a deal, and manage a multi-family investment. The accounting, tax, and legal aspects of being a landlord are part of the discussion.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/investing-in-residential-multi-family-real-estate-2020/
What Kind of Loan? (Series: Business Borrowing Basics)Financial Poise
In a broad sense, most loans can be divided into two basic types: an asset-based loan (ABL) and a cash flow loan.
An ABL is made by a lender who underwrites the loan primarily by valuing the company’s assets, such as accounts receivable (A/R) and inventory. An ABL lender underwrites a loan based on the ability to liquidate its collateral should it need to. A “cash flow” lender, in contrast, while also secured against the borrower’s assets, underwrites the loan primarily based on the cash flow and general credit-worthiness of the borrower.
The distinction between these types of loans is only the beginning of understanding the many types of loans available to a business, because within each of the two types there are many subtypes.
This webinar takes the audience through a guided tour of the various borrowing options available to businesses, from both a business and legal perspective, to paint the overall landscape of the different types of lenders that exist and to provide a framework for understanding what type of lender and loan may make sense for any particular borrower.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/what-kind-of-loan-2021/
Eddie Lampert bought Kmart out of bankruptcy. W.L. Ross made a fortune many times over buying steel and other companies out of bankruptcy. Hedge funds and other distressed debt traders buy and sell millions of dollars of distressed securities and bankruptcy claims every day. A number of private equity funds focus exclusively on buying distressed businesses, fixing, and selling them. And fortunes are made when real estate crashes by those who have the dry powder to swoop in and buy when others are forced to sell. This webinar explains how to loan to, or purchase the debt of, a company in order to acquire it (a strategy commonly called “loan to own”); how to learn about opportunities involving distressed companies; and tips and best practices for participating in bankruptcy, Article 9, and other sales of distressed businesses (including the concept of serving as the “stalking horse).
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/opportunity-amidst-crisis-buying-distressed-assets-claims-and-securities-for-fun-profit-2020/
"How to maximize your potential to attract US capital" by John Bautista TheFamily
By John Bautista, Partner at Orrick.
Join us IRL next time! http://meetup.com/thefamilyspecialevents
The contents of this video are intended for general information purposes only and should not be considered or construed as legal advice. The distribution of this presentation or its content is not intended to create, and receipt of it does not constitute, an attorney-client relationship. (The views set forth herein are the personal views of the presenters and do not necessarily reflect those of Orrick, Herrington & Sutcliffe.)
Key & Common Negotiated Provisions - Part 1 (Series: PRIVATE COMPANY M&A BOOT...Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. Episodes 3 and 4 of this series explain specific, common provisions and discuss how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Between Episodes 3 and 4, topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financialpoisewebinars/on_demand_webinars/common-negotiated-provisions-part-1/
Eye of the Tiger: Preparing to Sell Your BusinessNow Dentons
This presentation outlines the role of legal counsel in the acquisition process, pre-sale due diligence, important strategic issues in selling your business, as well as tax considerations related to the sale of a business.
How to Position Your Startup for Venture Capital Fundingideatoipo
During this webinar you will learn the basics of the venture model and path along with the necessary steps to take so that your company’s legal structure is an attractive investment. The discussion will cover:
1. Why a Delaware C-Corp is the most-common structure
2. How to document the relationship of the founders and early employees
3. The typical funding stages of a successful startup
4. An overview of convertible debt and SAFEs
5. Why it’s critical to run pro forma cap tables before financings
6. What happens in a venture financing
7. Why compliance with securities laws is important
8. Common legal mistakes in raising capital
9. And much, much more
There is an old carpenters’ expression, “measure twice, cut once.” M&A work is just one of many areas in business and law where this expression resonates. Buyers and sellers, like chess players anticipating many moves in advance, should envision and plan the route to get a deal done, including anticipated detours, at the onset of the transaction.
This webinar discusses the similarities and differences between basic M&A transaction structures; purchase price payment concerns; the most common issues that arise in the early stages of M&A transactions of all kinds; the relationship between ostensibly unrelated sections of an M&A agreement; and transaction timeline. One focus of this episode is a threshold question in many deals: whether the buyer will buy equity or assets. This episode will, in summary form, cover many of the issues discussed in greater depth in subsequent episodes.
Part of the webinar series: M&A BOOT CAMP - 2022
See more at https://www.financialpoise.com/webinars/
The leveraged lending market has developed its own set of market terms and conventions, many of which do not exist outside of this market. This webinar gives a basic overview of leveraged finance credit agreements and the legal issues that arise when working on leveraged loans.
Part of the webinar series: LEVERAGED FINANCE 2021
See more at https://www.financialpoise.com/webinars/
Investing in Commercial Property (Series: Real Estate Investing 101 - 2020) Financial Poise
Before taking the plunge into commercial real estate investing, one should have a clear understanding of how to select the right location, preferred type and class of property, what due diligence to do, how to secure financing, how to negotiate a deal, and how to manage the property going forward as a commercial landlord. This Financial Poise panel explains the process from looking for the investment, to contract, to closing, and beyond.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/investing-in-commercial-property-2020/
RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022: Bad Debtor Owes Me Money!Financial Poise
Sometimes it begins when a client, tenant, or customer starts to slow-pay, with the result that your accounts receivable start to accrue gradually. Other times the issue presents itself more suddenly. Either way, you find your company owed a great deal of money that looks like it may not be collected because your client/tenant/customer has filed bankruptcy, has commenced an assignment for the benefit of creditors, has been put into receivership, or is otherwise just plain insolvent. What do you do? What should you not do? The topics discussed in this webinar include the pros and cons of putting a counterparty into involuntary bankruptcy; when and how you may be able to pursue third parties (like guarantors, directors, or officers) for the amount owed; risks related to preference attack; pros and cons of sitting on a “creditors’ committee” in a Chapter 11; how to negotiate for “critical vendor” protection in Chapter 11; and practical guidance for continuing to provide goods or services to an insolvent counterparty.
Part of the webinar series: RESTRUCTURING, INSOLVENCY & TROUBLED COMPANIES 2022
See more at https://www.financialpoise.com/webinars/
Before taking the plunge into commercial real estate investing, one should have a clear understanding of how to select the right location, preferred type and class of property, what due diligence to do, how to secure financing, how to negotiate a deal, and how to manage the property going forward as a commercial landlord. This Financial Poise panel explains the process from looking for the investment, to contract, to closing, and beyond.
Part of the webinar series: REAL ESTATE INVESTING 101 - 2022
See more at https://www.financialpoise.com/webinars/
Dodd-Frank Compliance and Technology Summer Meeting 2013Jeffrey C.Y. Li
Atlas Communications Technology recently co-sponsored the Dodd-Frank Compliance and Technology Summer Meeting. The presentation was an introduction to the complexities of the Dodd-Frank Wall Street Reform and Consumer Protection Act, what firms need to do to bring themselves into compliance, and the technology that can help enterprises meet the stringent demands of the act.
For more information about this conference, or to learn about our Fall meeting in September featuring one of the authors of the act, Congressman Jim Himes, please call 1-855-Dodd Frank (1-855-363-3372) for any questions, or if you wish to talk to one of our presenters today to talk about taking the next steps towards Dodd-Frank Compliance
Atlas Presentation 2013 07-09 dodd-frank summer meeting v1-0 (for online)
The deal is complete, and the parties have finished the hard work. Or have they? Integration planning turns to execution as people, process, and technology are combined once the deal is legally closed. The buyer will need to consider the purchased business or assets from the standpoint of employees, IT, customers, suppliers, and a multitude of other areas. In addition, numerous post-closing legal issues may arise, including purchase price adjustments, breaches of representations and warranties, enforcement of key negative employment-related covenants and restrictive covenants, collection of pre-closing accounts receivable, and true-ups of final financials. This episode guides listeners through the process, timing, and issues which most commonly arise after the closing of deals.
Part of the webinar series:
M&A BOOT CAMP - 2022
See more at https://www.financialpoise.com/webinars/
Every company needs access to cash to fund its operations. Companies in bankruptcy are no different. But how should a company planning to enter bankruptcy approach this issue if all of its cash is tied up by a secured lender? What will a bankruptcy judge say when the company asks her permission to use cash on terms presented by its lender? How should lenders, debtors, and creditors approach negotiations over the terms of a cash collateral order or debtor-in-possession (DIP) financing agreement? This webinar focuses on answering these questions for advanced business reorganization practitioners and advisors from the perspective of all parties to a negotiation, as well as addressing best practices in drafting, negotiating, and presenting cash collateral and DIP financing orders in complex reorganization proceedings.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/negotiating-and-drafting-cash-collateral-dip-financing-orders-2020/
The law imposes a high standard of conduct on directors and officers. If a director or officer falls below this standard, they may face personal liability. This presentation will provide an overview of the duties and liabilities faced by a company’s Board, including strategies for avoiding the pitfalls associated with acting as a director or officer.
Sometimes It Begins When A Client, Tenant, Or Customer Starts To Slow-Pay, With The Result That Your Accounts Receivable Start To Accrue Gradually. Other Times The Issue Presents Itself More Suddenly. Either Way, You Find Your Company Owed A Great Deal Of Money That Looks Like It May Not Be Collected Because Your Client/Tenant/Customer Has Filed Bankruptcy, Has Commenced An Assignment For The Benefit Of Creditors, Has Been Put Into Receivership, Or Is Otherwise Just Plain Insolvent. What Do You Do? What Should You Not Do? The Topics Discussed In This Webinar Include The Pros And Cons Of Putting A Counterparty Into Involuntary Bankruptcy; When And How You May Be Able To Pursue Third Parties (Like Guarantors, Directors, Or Officers) For The Amount Owed; Risks Related To Preference Attack; Pros And Cons Of Sitting On A “Creditors’ Committee” In A Chapter 11; How To Negotiate For “Critical Vendor” Protection In Chapter 11; And Practical Guidance For Continuing To Provide Goods Or Services To An Insolvent Counterparty.
Part of the webinar series: Restructuring, Insolvency & Troubled Companies 2021
See more at https://www.financialpoise.com/webinars/
This webinar is critical for entrepreneurs who will be raising a preferred round in the near future. This webinar is designed to teach you what to expect when your company sells preferred stock in a venture round.
During this webinar, veteran Silicon Valley venture capital attorney Jason Putnam Gordon will cover the following topics:
· What venture capitalists are looking for when they invest in a company
· What makes a company a potential investment for a venture capital fund
· Pre-round issues
· What makes a good investor and how to find them
· How to negotiate a term sheet
· The deal documentation
· The diligence process
· Closing issues
· Post-closing issues
· Common pitfalls when raising venture capital
· And much, much more
The Language & Structure of Angel & Venture DealsKieran McCarthy
Do you know what a term sheet is? A convertible note? Preferred stock? A private placement memorandum? A 506 offering? A liquidation preference? A participation right? A tag-along right?
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1. Mergers & Acquisitions: What VC Investors Should Know
Laurie A. Allen
Royse Law Firm, PC
10900 Wilshire Blvd., Suite 300
Los Angeles, CA 90024
(310) 481-0125/(310) 770-2696
lallen@rroyselaw.com
IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this
communication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1)
avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.
2. OVERVIEW
• Board Consideration of Acquisition Proposal
• Director Indemnification
• M&A Planning
• M&A Transaction Process & Structures
• M&A Issues with Selling Shareholder Implications
• Litigation Expense Funds
• Holdback Escrow and Escrow Agreements
• Earn-Outs
• Shareholder Representative
2
3. BOARD CONSIDERATION OF ACQUISTION PROPOSAL
• Fiduciary Duties:
• To Shareholders
• To Creditors for Troubled Companies
• Best Practices Approach:
• Be Informed About the Company’s Value
• Be Actively Engaged in the Process
• Consider All Available Alternatives
• Use a Reasonable Process to Gather Information
• Appoint Special Committee
3
4. DIRECTOR INDEMNIFICAITON
• Director Indemnification – Before Assuming Board Seat
• Update Charter and Bylaws
• Indemnification Agreement – Include Levy language
• D&O Insurance
• Merger Agreement - D&O Post-Closing Indemnity
• Buyer’s Covenant to Continue Director Indemnity for
Specified Time
• Company Assumes Director Indemnification Agreement or
Buyer Directly Indemnifies Former Directors
• Covenant to Continue or Obtain New D&O Policy (usually
for six years and premium cap)
4
5. VENTURE M&A PLANNING
• Strategic Investors
• Do Not Grant Rights to Block Sale
• No ROFR or Similar Protective Provision
• Notification Rights OK
•Drag-Along Rights – From Everybody, Especially Founders
•Limit Outstanding Series of Preferred – Think Recapitalize
•Late Stage Investors – Preference not Blocking Right
5
6. VENTURE M&A PLANNING
• Long Term Liabilities – Keep Them to A Minimum
• LOIs and No-Shop Clauses
• Buyer Will Insist
• Hammer Out All “Big Ticket” Issues as quid pro quo
•Management Roles/Compensation are VC’s Business, Especially if
Earn-Out Proceeds Payable to VC Investor
•Company Charter - Ensure Charter Anticipates Exit
•Discuss Exit Expectations at Investment Stage
• Obtain Buy-In from Management and Board on Timing and
Expected Returns
6
7. MANAGEMENT M&A PLANNING
•Organize Company Books and Records
• Corporate Minutes/Board Approvals
• Cap Table/Shareholder Records/Share Certificates
• Tax Returns/Governmental Filings
• Financials/Balance Sheet & Earnings Statement
• Third Party Consents
• Establish Ownership of IP and Clean-up IP Documents
• Patent Filings, Discuss Possible Infringement
• Properly document and record transfers of IP to the Company
• Review Licenses/Third Party Consents
• Resolve or quantify outstanding lawsuits and claims
7
8. MANAGEMENT M&A PLANNING
• Tax and ERISA Issues
• 409A Issues – Option Valuation, Severance
Agreements, Deferred Compensation
• 280G Golden Parachute Payments
• ERISA Plan Compliance
•Employment Issues
• Executive Employment Agreements; Offer Letters
• Payments Triggered by Change-in-Control
• Stock Options, Bonus Plans Or Other Equity Awards
• Comply w/ Employee Classification/Wage and Hour Laws
• Triage Potential Problems with “Consenting” Shareholders
8
9. M&A TRANSACTION PROCESS
• Preliminary Due Diligence
• Negotiate and Sign Letter of Intent
• Good Time to InvolveCFO/GC or Legal Counselre Deal
Structure, Accounting and Legal issues
• In-depth Business and Legal Due Diligence
• Purchase Agreement
• Ancillary Documents
• Closing
9
10. BASIC M&A TRANSACTION STRUCTURES
• Tax Free Reorganizations
• Type A – Merger
• Type B – Stock for Stock
• Type C – Stock for Assets
• Type D – Spin Off, Split Off, Split Up, and Type D Acquisitive
Reorganizations
• Taxable Transactions
• Stock Sale
• Asset Sale
• Partnership Techniques
10
11. M&A ISSUES /SELLING SHAREHOLDER IMPLICATIONS
• Conflict of Interest: Seller’s Counsel
• Seller’s Counsel represents Company
• Attorney-Client Privilege Stays with Company
• Post Closing Dispute:
• Pre-closing VC investor disclosures compromised
• Seller’s counsel cannot represent VC investors
• Either Waive Conflict of Interest or Retain Separate Investor
Counsel
11
12. M&A ISSUES/SELLING SHAREHOLDER IMPLICATIONS
• Working Capital Issues
• Definition of “working capital”
• Consequences of Late Delivery of Buyer’s Working Capital
Statement & Additional Response Time
• Indemnification Claim and/or Working Capital Adjustment
• Tax Issues
•Shareholder Representative to Review and Approve Tax
Returns covering Pre-Closing Activity
• Tax Liabilities Subject to Dispute Resolution Mechanism in
Merger Agreement
12
13. M&A ISSUES/SELLING SHAREHOLDER IMPLICATIONS
• Joint & Several Liability
• Joint Obligors – Do not rely on common law contribution
rights
• Contribution Provision & Letter of Transmittal
• Joinder and Contribution Agreements
• Indemnification
• “Damages” – Always Define to avoid claims for special,
incidental, consequential or punitive damages
• Survival of Shareholder Representations and Warranties
• Carve Outs – Time limitations, Caps and Baskets
13
14. LITIGATION EXPENSE FUNDS
•According to SRS:
• 2 Out of 3 Deals have Expense Funds
•The Average Expense Fund is over $268,000
•Expense Funds Range between $25,000 and $1M
•The Average Expense Fund is <1% of the Sale Price
• Why set up an Expense Fund?
•Deters Buyer Claims
•Provides Options for Selling Shareholders
•Fair and Equitable Allocation of Expenses
14
15. ESCROW ACCOUNT PROCESS
% Purchase Price Deposited in
Escrow at Closing
No Escrow Claims Buyer Escrow Claims
Funds Disbursed Funds Disbursed
Funds If No by Escrow Agent to
to Seller Upon Counterclaim, Funds
Disbursed to Receipt by Buyer and/or Seller
Sellers per Disbursed to Buyer According to
Escrow Agent of = Amount of Escrow
Merger Written Written
Agreement Claim Instructions
Instructions
15
16. ESCROW AGREEMENT ISSUES
• Avoiding “Lock Up” of Escrowed Funds
• Avoid Indemnity Claims For “Reasonably Anticipated” Damages
• Escrow Agent will not Mediate Disputes
• Forced to Either Sue Buyer or Wait for Expiration of S/L
• Instead . . .
• Perfected Security Interests in Escrow Funds
• Escrow is a Neutral Fund
• Properly Define “Merger Consideration”
• If Buyer won’t Concede, consider a Holdback instead of Escrow
•Tax Treatment of Payments from Escrow
• Payments from Escrow
• Imputed Interest
16
17. EARN-OUTS
•Structure and Terms
• Different Triggers
• Forms of Payment
• Adjustments for Performance
• Operational Covenants
• Milestones
• Should be Based on Clearly Defined Events/Results
• Financial Milestones should consider Accounting Method
• Length of Earn-Out Period is Key
•Post-Closing Control of Business
• Highly negotiated
• Often Tension between Seller and Buyer’s interests
17
18. EARN-OUTS
•Regulatory Implications
• Tax - Revenue Recognition, Timing and Income
Characterization
• Accounting - FAS 141(R) Requires Buyer to Record Fair Value of
Expected Earn-out at Closing
• Securities - Is Right to Receive Earn-out Payment a “Security”?
• Predictability of Purchase Price
•complicates determinations of various payments
•financial advisory fees
• preferences due to preferred stockholders
• calculation of “fair value” for dissenters rights, etc.
18
19. EARN-OUTS
•Disputes
• Post-closing Disagreements Over
• Interpretation of a Defined Milestone
• Confirming Financial/Business Performance
• Support to be Provided by Buyer
• Whose Fault When Milestone Not Met on Time or at All?
• Litigation – How Coordinated and Who Pays?
•Earn-outs for Public Company Targets
•Rare, but Doable
• “Contingent Value Rights”
• Third Party Rights Agents for Public Company Shareholders
19
20. SELLER FINANCING AS AN ALTERNATIVE TO EARN-OUTS
• Notes at Pre-Negotiated Interest Rates
• Typically 3-5 yr term with monthly, quarterly or semi-annually
• Typically subordinate to Senior Lenders
• Unsecured
• May be Inadequate Cash for Payments if Material Decrease in
Business Cash-Flow
• Less Risky Than Earn-Outs if:
•Confidence in the Business
• Trust and Confidence in the Buyer
20
21. SHOULD THERE BE A SHAREHOLDER REPRESENTATIVE?
• Public Company M&A
•Few, if any, post-closing shareholder obligations
• Target is subject to SEC reporting requirements
• Seller will pursue litigation against BOD and management, not
public shareholders
• Private Company M&A
• Heavily negotiated shareholder representations/idemnity
• Escrows and Holdbacks are usually required to protect Buyer
from breaches/working capital differentials
21
22. SHAREHOLDER REPRESENTATIVE
•Shareholder Representative
•Speaks and Acts on Behalf of Selling Shareholders if post-closing
claim for Indemnification or post-closing purchase price
adjustments are made
• Role assumed by one of Selling Shareholders or Third Party
Agent
• Engagement Letter
•Scope of Authority
• Expense Fund Parameters
• Can Appoint Selling Shareholder “Advisor”
• Indemnity: Who’s on the Hook?
22
24. PORTFOLIO COMPANY CHARTER
• Company Charter May Not Properly Anticipate Exit
• Merger May Include Escrow, Holdback and Earn-Outs, but
Liquidation Preferences not Fully Covered by Closing Proceeds
• Non-Participating Preferred or Participating Preferred w/ Cap
• Either take liquidation preference or portion of the proceeds
as if converted, but not both
• Forces choice between payment at closing/forfeit future
upside or converting to common/hope for future upside
• Uncertainty Whether VC Investor Proceeds Subject to Escrow
• Have Discussion at the Investment Stage to Avoid
Shareholder Controversies Upon Sale
24
25. Fiduciary Duties for VC Board Members
• Fiduciary Duties in Considering Acquisition Proposal
• Duty to Shareholders, not VC Funds
• Duty is same whether Target is Public or Private
• Minority Shareholder Claim Risk in Certain Situations
– Down Round or Cram Down Financings
– Former Laid-Off Employee Shareholders
– Hostile Significant Shareholder without Board Seat
• Fiduciary Duty Compliance and Recordkeeping are Key
to Successfully Defend Against Minority Shareholder
Lawsuits
25
26. Fiduciary Duties for VC Board Members
• Troubled Company Issues
• If in “Zone of Insolvency,” Directors Duty is to Maximize Value
for Whole Enterprise (including creditors)
• Look for Warning Signs of Insolvency
• Ensure Adequate Decision-making Processes
• Document Good Faith Exercise of Business Judgment
• Consult Counsel, Restructuring and Valuation Experts
• Demand Management Accountability
• Consult Creditors
• Avoid Insider Transactions
26
27. Fiduciary Duties for VC Board Members
• Business Judgment Rule – Delaware and California
• Duty of Care
•Avoid Haste
• Carefully Review of All Relevant Material
• Seek Out Relevant Information from Management
• Ask Questions and Test Accuracy of Information
• Rely on Expert Advice
•Advisors Should be Unbiased and Competent
• Observe Corporate Formalities and Document Deliberations
27
28. Fiduciary Duties for VC Board Members
• Duty of Loyalty
• Duty Owed to Corporation and its Shareholders
• Prohibits “Self-Dealing”
• In re Trados(Del.Ch. 2009) – Director could breach fiduciary
duty by improperly favoring interests of preferred over
common shareholders who received no consideration
- Implement Process to Represent Common Shareholder Interests
- Drag Along Rights Alone May be Insufficient
• Good Faith - Duty to Act in a Reasonable and Deliberate
Manner and in the Best Interests of the Corporation
28
29. TYPE A REORGANIZATIONS – SECTION
368(a)(1)(A) STATUTORY MERGER
Shareholders
Target Acquiror
• Statutory Merger – 2 or more Requirements:
corporations combined and only • Necessary Continuity of Interest
one survives (Rev. Rul. 2000-5) • Business Purpose
• Requires strict compliance with • Continuity of Business Enterprise
statute • Plan of Reorganization
Tax Effect:
• Target can be foreign; Reg.
• Shareholders – Gain recognized to the extent of boot
1.368-2(b)(1)(ii)
• Target – No gain recognition
• No “substantially all” • Acquiror takes Target’s basis in assets plus gain
requirement recognized by Shareholders
• No “solely for voting stock” • Busted Merger – taxable asset sale followed by
requirement liquidation
29
30. TYPE B REORGANIZATIONS – SECTION
368(a)(1)(B) STOCK FOR STOCK
Shareholders
Target Acquiror
• Acquisition of stock of Target, by • Acquiror’s basis in Target stock is the
same as the Shareholder’s basis prior
Acquiror in exchange for Acquiror
to the acquisition
voting stock
• Solely for voting stock
• Acquiror needs control of Target
• No Boot in a B
immediately after the acquisition
• Reorganization Expenses – distinguish
• Control = 80% by vote and 80% of between Target expenses and Target
each class Shareholder expenses (Rev. Rul. 73-54)
• Creeping B – old and cold stock
purchased for cash should not be
integrated with stock exchange
30
31. TYPE C REORGANIZATIONS – SECTION
368(a)(1)(C) STOCK FOR ASSETS
Shareholders
Acquiror
Stock
Acquiror Stock
Target Acquiror
Target Assets
• Acquisition of substantially all of the assets • Reorganization Expenses – Aquiror may
of Target, by Acquiror in exchange for
assume expenses (Rev. Rul. 73-54)
Acquiror voting stock
• “Substantially All” – at least 90% of FMV of • Assumption of stock options not boot
Net Assets and at least 70% of FMV of • Bridge loans by Acquiror are boot
Gross Assets
• Target must liquidate in the reorganization
• Redemptions and Dividends – who pays
• 20% Boot Exception – Acquiror can pay and source of funds
boot (non-stock) for Target assets, up to
20% of total consideration; liabilities
assumed are not considered boot unless
other boot exists
31
32. TYPE D REORGANIZATIONS – SECTION
368(a)(1)(D) DIVISIVE SPIN OFF, SPLIT
OFF, SPLIT UP
Shareholders
Transferee
Stock
Transferee Stock
Transferor Transferee
Transferor Assets
• Divisive – transfer by a corporation of all or part of its assets
to another corporation if, immediately after the transfer, the
transferor or its shareholders are in control of the transferee
corporation. Stock or securities of the transferee must be
distributed under the plan in a transaction that qualifies
under Section 354, 355, or 356.
32
33. TYPE D REORGANIZATIONS – SECTION
368(a)(1)(D) NON-DIVISIVE
Merger Treated as Acquisitive D • If shareholders of Transferor stock receive
Acquiror stock and own at least 50% of
Shareholders Acquiror stock, the transaction may be
with 20% treated as a non-divisive D REORG even if it
Acquiror fails as an A REORG for lack of continuity
Stock
Acquiror Stock
Transferor Acquiror
Transferor Assets
Merger
Failed Type C Treated as D Liquidation / Reincorporation
Shareholders Shareholders
Assets
Transferor Acquiror Transferor Acquiror
Cash & Stock
33
34. TAXABLE STOCK PURCHASES
Cash Reverse
T Shareholders
Triangular Merger
T P Treated as Stock Sale
S
• Shareholders have gain or loss
• P takes cost basis in Target shares
Key:
T = Target P = Acquiror S = Merger Sub
34
35. CASH FORWARD MERGER
T Shareholders
T Merger
P Asset sale followed by
P Survives liquidation of Target
Variation with Merger Sub: • Target has gain on sale
T Shareholders • Target shareholders have
gain on liquidation
T P (unless 332 applies)
• P takes cost basis in
Target assets
S
Key:
T = Target P = Acquiror S = Merger Sub
35