Mergers and Acquisition Final Outline

Topics: Stock, Shareholder, Stock market Pages: 25 (6066 words) Published: January 8, 2013
Mergers & Acquisitions Outline

How do lawyers create value?
• Protect interests/value
• Reduce risk/uncertainty (which affect valuation), increasing options

Laws That Affect Mergers
• Corporate Law – creating entities to allocate risk; who gets to decide o State law: determined by state of incorporation
o Statutes and judicial decision
• Securities Law – disclosure
o Federal law
• Antitrust Law – restraints of trade
o Federal law
• Tax Law – the gov’t share
o Federal law

Sources of Law:
• State Law – corporate law
o Statutes and judicial decisions
• Federal Law – antitrust, taxation, agencies (SEC)
• Stock Exchanges
o BOD must have independent directors

Corporate Law: (positive law)
• Provides an efficient form to transact business (Corporate form) • Provides a form to efficiently implement an acquisition (Merger form)

What Directors Can Do – Rule # 1, Trust Directors to make corporate decisions • Issue shares or other securities
• Hire and fire executives & make employment contracts • Buy & sell assets
• Partial exception: As to mergers, sales of substantially all assets, and charter amendment, shareholders must vote, but board is a gatekeeper as to which deals go forward to shareholders. • Defensive tactics: Directors rule, protected by BJR

What Shareholders Can do – Rule # 2, A few things to constrain agency costs • Vote
o On Mergers only after directors act (gatekeeper role) o Elect/remove directors
▪ Annual meeting
▪ Special meeting
▪ Written consent
• Sell
o Tender Offers
▪ Selling shares to a bidder – either friendly or hostile o On the market
o Power comes from Property Law
• Sue
o Breach of fiduciary duty of care, loyalty and good faith

Securities Law:
• Issuance of securities
o Triggered in the initial transaction to sell (not resale) o Securities Act of 1933
o Full disclosure
o Strict liability of issuer for any misstatements
o Reliance and causation presumed
• Solicitation of proxies
o Triggered by “solicitation” – needs voting
o When acquirer is giving stock
o Form 14A
• Making a Tender Offer
o Triggered when shareholders are asked to tender – selling ▪ Section 14(d)
o Williams Act - Section 13(d): any 5% shareholder must disclose block • Going Private
o Triggered by causing stock to be delisted or deregistered o Must file a Schedule 13E-3 and disclose:
▪ Source of funds
▪ Management equity participation
▪ Employment arrangements
▪ Potential conflicts of interest
▪ Offers by unaffiliated parties over prior 18 months o Board statement saying they reasonably believe it is fair • Periodic Reporting
o Annual 10K
o Quarterly 10Q
o Real-time reporting 8K
• Liability
o Material misstatements or omissions in proxy or prospectus may give purchasers a right to unwind and get money back o Voluntary statements (i.e. press release) can create liability o Rule 10b-5 addresses “fraud”

• Insider Trading – When Silence is Fraud (a duty to speak) o Classic insider: director, officer (fiduciary duty to Target SH) o Tippee: info conveyed in breach of duty inherits classic’s duty when tipper benefited and tippee knew/should have known (i.e. for money) o Constructive: info conveyed for legit purpose (attorney, accountant) o Misappropriator: info doesn’t come from target company – employees breach of duty to employer o Anyone with info in a tender offer: Rule 14e-3

Antitrust Law...
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