Mergers & Acquisitions
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Inside M&A – Fall Issue

McDermott recently released the Fall 2013 issue of Inside M&A, which focuses on current issues surrounding mergers and acquisitions.  Articles in this issue include: M&A Corporate Governance: Oversight of the Board’s Financial Advisors Recent Delaware Court of Chancery decisions highlight the need for corporations engaging in M&A transactions to increase their oversight of financial advisors. Paving the Way for More Tender Offers: DGCL 251(h) Streamlines Two-Step Merger Process The newly added Section 251(h) of the Delaware General Corporation Law (DGCL) allows the completion of a second-step merger without stockholder approval under certain circumstances. Cross-Border M&A: Managing the CFIUS Review Process Parties engaging in cross-border M&A transactions should be cognizant of the potential negative outcomes in the Committee on Foreign Investment in the United States (CFIUS) review process and take appropriate measures to protect their...

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An Alternative to M&A – Pre-Sale Joint Venture As First Step of a Staged Sale

At times when funding may not be available or general economic uncertainty may otherwise preclude a M&A transaction from being completed, it is worth contemplating a pre-sale joint venture as a viable alternative.  The advantages are clear.  For the ultimate seller, it can be the first step toward a full exit.  For the ultimate buyer, it provides a unique opportunity for a particularly thorough due diligence and valuation exercise.  While a pre-sale joint venture is not easily implemented, under certain circumstances the mix of assets, goodwill and/or know-how contributed by both parties may be more attractive, and the joint venture may be easier to accomplish, than identifying a party with the wherewithal or willingness to complete a traditional M&A transaction.  Cash will of course eventually change hands at the sale stage when the purpose of the joint venture has been fulfilled and one party purchases the joint venture from the other party. While...

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Caveat Emptor: Successor Liability for FLSA Claims

One of the primary advantages to acquiring businesses through asset sales as opposed to stock sales is the buyer’s ability to avoid successor liability.  There are exceptions to this rule in most states, including:  (i) impliedly or expressly assuming the liability in the asset purchase agreement; (ii) fraudulent sales of assets for the purpose of escaping liability; (iii) sales that are de facto mergers; and (iv) where the purchase is a mere continuation of the seller.  As a general matter, these exceptions are difficult to prove for parties seeking to establish successor liability. In Teed v. Thomas & Betts Power Solutions, LLC, the U.S. Court of Appeals for the Seventh Circuit recently addressed the limits of successor liability and ruled that an asset purchaser was liable for the seller’s pre-sale violations of the Fair Labor Standard Act (FLSA).  The company, faced with a lawsuit for FLSA violations, defaulted on their bank loan.  The company’s...

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Illinois Appellate Court Decision Requires More Than At-Will Employment As Consideration For Non-Compete Agreements

On June 24, 2013, the Appellate Court of Illinois (First District) issued a decision in Fifield v. Premier Dealer Servs., 2013 IL App (1st) 120327, that will make it more difficult for Illinois employers to enforce post-employment non-compete agreements against newly hired employees who are employed for less than two years and leave, for whatever reason, and join a competitor.  The issue in Fifield was whether the promise of at-will employment to a new employee, without more, constitutes consideration adequate to support postemployment restrictive covenants.  Fifield lost his job after his employer was acquired but was subsequently offered employment with the successor company.   As a condition to his employment with the successor company, Fifield signed a two-year post-employment non-compete agreement.  The agreement contained a carve-out allowing Fifield to work for a competitor if he was fired without cause within the first year of employment.  Three...

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Recurring Issues in African M&A

Economic growth in sub-Saharan Africa continues at a pace that is impressive in comparison with global averages.  While the more mature markets in the United States and Europe continue to struggle with the consequences of the financial crisis of 2008, the outlook for business in Africa is very different. To read the full article, click here.

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The French Legal Framework Relating to Profit-Sharing Premiums

The French legal system provides a variety of ways to secure the involvement of employees in the growth and profits of their company, including compulsory deferred profit-sharing plans (accords de participation), optional voluntary cash-based profit-sharing plans (intéressement), and other similar mechanisms. The Amended Social Security Financing Law of 2011 provided for a new legal framework entitled "profit-sharing" premium (prime de partage des profits), which set forth rules to allocate premiums to the benefit of employees in the event their company decides to increase dividend distributions to its equityholder(s) (the “Premium Allocation Rules”). These Premium Allocation Rules are in force but have not yet been codified.  According to recent government declarations, however, the Premium Allocation Rules could be abrogated by the end of 2013. Overview Generally, the Premium Allocation Rules apply to privately held companies with at least 50 employees as...

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Accelerating Back-End Mergers in Public Company Acquisitions

The Corporation Law Section of the Delaware State Bar Association has proposed legislation that will amend the General Corporation Law (DGCL) to allow public companies to opt out of the current requirement to obtain stockholder approval of the back-end merger following a successful tender offer in which the buyer has obtained a majority of the target company's voting stock.  Traditionally, an accelerated back-end merger was only available if the buyer first obtained 90 percent ownership following a successful tender offer.  In situations where the buyer was unable to achieve this 90 percent threshold, the buyer was required to proceed with the formality of obtaining stockholder approval of the back-end merger, which required the preparation of a proxy statement that would be filed with, and subject to the comments of, the Securities Exchange Commission (SEC) before it could be mailed to the target company's stockholders in advance of the stockholder meeting...

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Welcome to McDermott’s Corporate Deal Source Blog

Where have all the transactions gone?  The first quarter has quietly passed by.  Just a few weeks ago, looking through the pipeline, one could see almost unimpeded to the other side, relatively empty as the bankers say.  But hope exists, as suddenly activity seems to be reemerging.  We call it letter of intent flow (more poetically, LOI Flow).  The beginnings of real transactions.  Concurrently with these beginnings, we launch our inaugural Corporate Deal Source Blog.  And perhaps timing is on our side and we are well positioned to ride the next wave of deal activity from its very beginning. We set out here to provide commentary, not intended for other lawyers, but for our clients and those we hope will find benefit from becoming our clients.  Our goal is to dialogue as much as one can in the blogosphere and that our followers will help drive our content through comment and suggestion.  The Corporate Deal Source Blog aims to be a professional, yet...

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Private Equity Firms Achieve Only Partial Dismissal of “Buying Club” Antitrust Lawsuit

The U.S. District Court for the District of Massachusetts recently limited the scope of a proposed shareholder class action against a number of private equity firms that participated in buyer consortia (Kirk Dahl et al. v. Bain Capital Partners LLC et al., Case No. 1:07-cv-12388 (D. Mass. Mar. 13, 2013).  Plaintiffs, shareholders of 27 companies acquired by the buying “clubs” from 2003 to 2007, allege that the private equity firms conspired to hold down the prices paid for the acquisition targets.  Among the defendants are Bain Capital LLC, KKR & Co. LP, the Carlyle Group LP, and other prominent private equity firms. The court’s decision criticized plaintiffs for making broad claims of a conspiracy based on evidence of friendly relationships among executives of the private equity firms and the fact that losing bidders were sometimes invited by winning bidders to form bidding clubs.  Instead, the court narrowed plaintiffs’ conspiracy claim to allege only...

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