Focus on Private Equity – October 2014

McDermott Will & Emery has released the October 2014 issue of Focus on Private Equity, which provides insight on issues surrounding private equity transactions and the investment life cycle across industries. Articles in this issue include:

Proposed EU Merger Review of Non-Controlling Minority Shareholding Acquisitions: Challenges and Opportunities for Private Equity
A recently proposed plan to reform EU Merger Regulation could expand the scope of transactions subject to prior notification. For the first time, minority shareholding acquisitions that do not lead to a change in control could be subject to prior notification to the European Commission. The proposed expansion of the Merger Regulation’s jurisdiction could significantly impact businesses.
Read the full article.

IPO Market Offers Attractive Exit Alternative for Sponsor-backed Companies
The strong IPO market offers private equity sponsors an attractive alternative to the sale of a portfolio company. However, the IPO process is complex, and must be structured properly at the outset. This article discusses some of the most significant structural considerations sponsors must consider in order to be in the position to obtain the maximum benefit from an IPO.
Read the full article.




Inside M&A – Fall 2014

McDermott Will & Emery has released the Fall 2014 issue of Inside M&A, which focuses on current issues surrounding mergers and acquisitions.  Articles in this issue include:

Managing Compliance Risks in M&A Transactions
Compliance risk management plays an increasingly important role in mergers and acquisitions transactions.  Appropriate compliance due diligence helps to establish the true value of the target company because successor liability for non-compliance of the target company can jeopardize the whole transaction.  Post-closing compliance initiatives help to reduce the compliance risks significantly.
Read the full article. 

You’ve Acquired a New Qualified Retirement Plan?  Time for a Compliance Check
In connection with a merger or acquisition, an acquiring company may end up assuming sponsorship of a tax-qualified retirement plan that covers employees of the acquired company.  This article provides a brief summary of some key issues that a company should focus on to ensure that the numerous administrative and fiduciary requirements involved in maintaining a qualified retirement plan will continue to be met on an ongoing basis if the plan will continue to be maintained following the acquisition.
Read the full article.  

A Personal Interest in Compliance
All individuals involved in a proposed sale transaction have a personal stake in full federal, state and local legal compliance because of expanding doctrines of personal liability and successorship liability, notwithstanding transaction documents that purport to disclaim assumption of seller’s liabilities.
Read the full article.  

View the full issue (PDF)




Search Funds: Catering to Canadian Investors

As those in the search fund community are aware, finding the right investors for a fund is critical to its success.  Equity sources bring more than their capital to the table; the best investors serve as experienced advisers and trusted mentors to search funders as they navigate the acquisition phase and beyond.  As the search fund model has proliferated both within and beyond the United States, today’s search funders may have more potential stops on their “roadshows” than their predecessors.

In seeking their ideal mix of initial investors, several of our recent search fund clients have ventured north of the border to raise a portion of their equity.  For search funds, which are typically structured as U.S. limited liability companies (LLC) with heavily standardized investment documents, taking on Canadian investors in a U.S. search fund has raised some interesting legal and practical issues.  Below are a few gating items for the search funder to consider in deciding whether to open the fund up to investors in Canada and elsewhere:

  • What percentage of your investor base will be from Canada?  The greater your percentage, the more likely it is that the search funder will want to structure the fund to cater to its Canadian investors.
  • What type of tax treatment do your Canadian investors expect?  Search funds generally utilize an LLC as the capitalized entity, which is treated as a partnership for U.S. tax purposes.  However, for Canadian tax purposes, U.S. LLCs are treated as corporations, which are subject to an entity-level tax.  This is a discrepancy that can significantly affect a Canadian investor’s economics.  The search funder may want to explore with his or her attorney whether an alternative structure, such as a limited partnership, is a viable option.
  • Do your investors have a tax presence in the United States, or will this be their only U.S. investment?  Because partnerships are essentially pass-through entities to their partners for tax purposes, investors in a partnership are inherently U.S. taxpayers.  For this reason, many non-U.S. investors prefer to invest in U.S. corporations, whereby the profits and losses of the entity are not passed through to its members.  If this is a particular sensitivity to the search fund’s Canadian investors, then the search funder may consider implementing a structure which will not result in the investor being a U.S. taxpayer.

In evaluating these alternatives, search funders should always be cognizant of how their U.S. investors may be impacted.  The above suggestions are not intended to be one-size-fits-all solutions.  As a practical matter, implementing a non-standard fund structure may affect the fund’s marketability to traditional sources of search fund financing.

Part of a search funder’s ongoing challenge is determining how best to serve its investors.  Experienced counsel can be a valuable resource in tailoring a fund to best accommodate both the search fund and its investors.  If some of those investors are Canadian, then the search funder should be aware of the issues that might affect such financiers’ investment decisions.




How Practitioners Can Apply Legal Project Management to M&A: New Tools for New Times

Learn how corporate counsel should (and are) adopting new tools and technologies resulting in significant efficiencies in legal project management. Byron Kalogerou, a Corporate partner in McDermott’s Boston office and co-chair of the Legal Project Management Task Force of the M&A Committee of the Business Law Section of the American Bar Association, explains why the “old way” no longer works and how legal project management is being utilized for M&A transactions. 

Read the full article.




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