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Transcript of © 2006 Dechert LLP March 22, 2006 Developments Affecting M&A Deal Structure Gerald AdlerRichard A....
© 2006 Dechert LLP
March 22, 2006
Developments Affecting M&A Deal Structure
Gerald Adler Richard A. Goldberg John M. Carroll Michael HirschfeldDechert LLP Dechert LLP Rothschild Dechert LLP
March 22, 2006
Developments Affecting M&A Deal Structure2
Director Fiduciary Duties in M&A Transactions
Gerald Adler
The author’s firm may have served as counsel in transactions and litigations discussed or referred to in this outline, and the views expressed are solely those of the author, and not necessarily the views of his firm or their clients. Readers should not act upon information in this outline without first seeking professional legal counseling. This outline does not constitute legal advice. This outline is current as of March 1, 2006.
March 22, 2006
Developments Affecting M&A Deal Structure3
Directors’ Actions Governed by State Rather Than Federal Law
All states impose:
– Duty of Care
– Duty of Loyalty
However, state laws differ:
– Some prescribe standards by statute (New York – Duty of Care that an ordinary prudent person in a like position would use under similar circumstances)
– Some permit—and even require—the board to consider interests of other constituencies such as employees, customers, and suppliers
March 22, 2006
Developments Affecting M&A Deal Structure4
Directors’ Actions Governed by State Rather Than Federal Law
We will focus on Delaware law because:
– More public companies are incorporated in Delaware than in any other state
– Delaware law in this area is the most developed
March 22, 2006
Developments Affecting M&A Deal Structure5
The Duty of Care
The duty of care requires directors to act on an informed basis. Standards include:
– Directors must “consider all material information reasonably available” to them in making decisions
– Directors must be “informed . . . to the extent the director reasonably believes to be appropriate under the circumstances”
The difference in standards may be semantic
– Directors need not be informed of every fact, but must be informed of all material facts that are reasonably available
Directors should obtain expert opinions such as fairness opinions to assist them in the exercise of their business judgment
– Outside opinions do not relieve directors of the obligation to exercise care and use their business judgment
March 22, 2006
Developments Affecting M&A Deal Structure6
The Duty of Loyalty
The duty of loyalty can be divided into two components:
– The director is or is not “interested” in the transaction
– The director is or is not “independent” relative to the decision or does not act in good faith
The “interest” and “independence” components of the duty of loyalty frequently create confusion
– Similar factual circumstances may implicate both interest and independence, one but not the other, or neither
March 22, 2006
Developments Affecting M&A Deal Structure7
The Duty of Loyalty
A director is “interested” if:
– The director or an associate of the director is a party to the transaction
– The director has a business, financial, or familial relationship with a party to the transaction, which could affect the director’s judgment with respect to the transaction in a manner adverse to the corporation
– The director is subject to a controlling influence by a party to the transaction or by a person who has a material pecuniary interest in the transaction, which could affect the director’s judgment with respect to the transaction in a manner adverse to the corporation
March 22, 2006
Developments Affecting M&A Deal Structure8
The Duty of Loyalty
A director is “independent” if:
– The “decision is based on the corporate merits of the subject before the board rather than extraneous considerations or influences”
– “Extraneous considerations or influences” may exist when the director is controlled by another. To determine “control,” courts look at a variety of factors, including familial, personal, and business relationships
March 22, 2006
Developments Affecting M&A Deal Structure9
Is There an Independent Duty of Good Faith?
Good Faith is important regardless of whether it is an independent duty
– Acting in good faith will exculpate directors for breaches of the Duty of Care
– Good Faith is also a component of the Business Judgment Rule
March 22, 2006
Developments Affecting M&A Deal Structure10
Standards for Reviewing Action by the Target’s Directors
General business judgment rule
– A presumption that in making a business decision, directors:
Acted on an informed basis
In Good Faith
In the honest belief that the action was in the best interest of the company
March 22, 2006
Developments Affecting M&A Deal Structure11
Standards for Reviewing Action by the Target’s Directors
Enhanced business judgment rule: the Unocal test
– Applies to review of a decision to take defensive action against a threatened acquisition of control
– Sometimes referred to as the Unocal test, since it was first articulated by the Delaware Supreme court in a case involving a defense by Unocal Corporation against a takeover bid
March 22, 2006
Developments Affecting M&A Deal Structure12
Determining a Takeover Threat
The Board must have reasonable grounds for believing there is a danger to corporate policy and effectiveness
– Further cases make clear that the Board can find a threat in the possibility of a takeover—even if one has not actually been launched
To determine if a takeover threat exists, the Board is obligated to make a reasonable investigation
Directors must show that the action taken was reasonable in relation to the threat posed
March 22, 2006
Developments Affecting M&A Deal Structure13
Seeking the Best Price Reasonably Available: The Revlon Test
If directors authorize the sale of control of the company, they have a duty to seek the highest price reasonably available
– Sometimes referred to as a Revlon duty, since it was described by the Delaware Supreme Court in a case involving Revlon’s reaction to a takeover bid
March 22, 2006
Developments Affecting M&A Deal Structure14
Seeking the Best Price Reasonably Available: The Revlon Test
When do the Revlon duties apply?
– The court in the Paramount v. Time (Del. 1990) decision identified two circumstances that would implicate these duties:
“[W]hen a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company”
“[W]here, in response to a bidder’s offer, a target abandons its long-term strategy and seeks an alternative transaction also involving the breakup of the company”
March 22, 2006
Developments Affecting M&A Deal Structure15
The Revlon Test
Note that there are a number of methods for a Board to seek the highest value
– Auction
– Market check
The target enters into an agreement with a buyer and then explores alternatives for a limited amount of time
– The method must be designed to determine the existence and viability of alternatives
March 22, 2006
Developments Affecting M&A Deal Structure16
The Revlon Test
QVC-Paramount and Barkan line of cases makes clear that while an auction is not necessary to satisfy the duty to seek best value, deal protection measures adopted without a market test must not unduly inhibit the ability of the board of a target company to negotiate with other potential bidders to obtain the highest possible value for the target’s stock
Directors should also not favor a bidder in which they have an interest
March 22, 2006
Developments Affecting M&A Deal Structure17
The Entire Fairness Test
If directors have economic interests that are in material conflict with those of the shareholders, the general business judgment test may not be applicable
– Directors may have to demonstrate that the transaction is entirely fair to the corporation and the shareholders (the “entire fairness” test)
March 22, 2006
Developments Affecting M&A Deal Structure18
The Entire Fairness Test
One cannot stress enough the importance of an active independent committee of directors:
– Committee should select and retain its own advisors, including investment bankers and counsel
– Committee should be fully informed, both regarding the terms of the transaction and in terms of diligence
– To fulfill their duties, directors serving on a special committee must actively oversee the conduct of the transaction (usually done on its behalf by the Committee’s advisers coupled with numerous update meetings)
March 22, 2006
Developments Affecting M&A Deal Structure19
Don’t Disenfranchise the Shareholders: The Blasius Test
An action taken without shareholder approval, with the sole or primary purpose of thwarting a shareholder vote or disenfranchising shareholders, will be upheld only if the directors can show a compelling justification for the action
– Sometimes called the Blasius test, after a leading case articulating it
March 22, 2006
Developments Affecting M&A Deal Structure20
Suggestions for Counseling the Board
The importance of good process
– The fairness of a corporate transaction has two components
substantive fairness (“fair price”); and
procedural fairness (“fair dealing”)
– Courts do not generally like to decide whether a corporate transaction is substantively fair
For example, whether the terms of a merger are fair
– The more defendants can show procedural fairness, the less likely it is that a court will overturn the directors’ determination as to the economic fairness of a transaction
For example, careful study by disinterested directors with access to relevant material information and with good and knowledgeable advisers
March 22, 2006
Developments Affecting M&A Deal Structure21
Suggestions for Counseling the Board
Directors’ conflicts of interest tend to lead to greater judicial review
Judges’ reluctance to impose their business judgment on corporations
Shareholder disenfranchisement is disfavored
March 22, 2006
Developments Affecting M&A Deal Structure22
When Is Revlon Mode Triggered?
Public company—no auction or market check commenced
Approached by major industry player to be acquired for all cash
Potential buyer doesn't want to be a "stalking horse"
Can the Board accept an offer without first conducting a market check?
What if the offer is for all stock or for partial stock?
March 22, 2006
Developments Affecting M&A Deal Structure23
Deal Protection
Richard A. Goldberg
The author’s firm may have served as counsel in transactions and litigations discussed or referred to in this outline, and the views expressed are solely those of the author, and not necessarily the views of his firm or their clients. Readers should not act upon information in this outline without first seeking professional legal counseling. This outline does not constitute legal advice. This outline is current as of March 1, 2006.
March 22, 2006
Developments Affecting M&A Deal Structure24
Why Have Deal Protection?
The public announcement of a transaction prompts other parties to bid
Acquirors seek to protect the deal certainty against an interloper’s efforts to bid for the target
Acquirors do not want to be a stalking horse for another transaction
If another bidder is successful, the acquirors wants to be compensated for their efforts and expenses
March 22, 2006
Developments Affecting M&A Deal Structure25
Types of Deal Protection
March 22, 2006
Developments Affecting M&A Deal Structure26
No-Shop Provision
Prevents the target from soliciting or encouraging bids from third parties, once the merger agreement has been signed
Fiduciary out from no-shop - most merger agreements contain an exception from the no-shop restriction to enable the target’s board to consider an unsolicited proposal. The typical exception contains the following requirements
– The proposal must have been received without solicitation or encouragement from the target
– The target board must determine in good faith, after considering advice of counsel, that the negotiation with, and provision of confidential information to, the competing bidder is necessary for the board to fulfill its fiduciary obligations
March 22, 2006
Developments Affecting M&A Deal Structure27
No-Shop Provision
– The target board must determine that the competing proposal is reasonably likely to result in a Superior Proposal, taking into account value and certainty of consummation
– The target board must give the acquiror notice of its receipt of the competing proposal, the identity of the competing bidder, the material terms of the competing proposal and the intention of the target to provide confidential information to the competing bidder
– The target board must keep the acquiror informed of the status of negotiations with the competing acquiror and any further proposals
March 22, 2006
Developments Affecting M&A Deal Structure28
No-Shop Provision
– The target must enter into a confidentiality agreement with the competing bidder on terms no less restrictive than those between the acquiror and the target
Terms of the confidentiality agreement are likely to include a standstill provision which will present the competing bidder from proceeding outside of the auction rules established by the target; e.g. by making a hostile tender offer directly to the shareholders of the target
Fiduciary out may not be necessary where “Revlon” duties do not apply - e.g., in a stock for stock merger where control remains with public shareholders rather than being transferred to a new control person such as in the Time Warner transaction
March 22, 2006
Developments Affecting M&A Deal Structure29
Break-up/Termination Fees
These are fees paid to the original acquiror upon termination of the merger agreement to compensate it for serving as a “stalking horse” for a superior proposal from a competing acquiror
– The amount of termination fee has been the subject of litigation and the resulting standard is that it must not be so high as to discourage other bidders
– Generally fees range between 1% and 5% of deal value (with average termination fees of approximately 3.5% in 2005; deals over one billion dollars averaged a little under 3% of deal value); higher fees are easier to support where (x) there has been a solid market check before the merger agreement was executed or (y) there is an extended period between signing and closing (e.g. where a regulatory approval will take time to obtain) thereby increasing the risk to the acquiror
March 22, 2006
Developments Affecting M&A Deal Structure30
Break-up/Termination Fees
– Triggering events for termination fee—
Clear case—where transaction is terminated due to change in board recommendation or exercise of fiduciary out
More controversial circumstances—breach of representation or covenant by target; failure to satisfy condition to closing, including failure to close by “drop-dead date”; target shareholders vote down the transaction
March 22, 2006
Developments Affecting M&A Deal Structure31
Force the Vote Provision
Section 251(c) of DGCL permits merger agreement to contain a provision requiring the target’s board to put the merger agreement to a vote of the shareholders, even if the board changes or withdraws its recommendation
March 22, 2006
Developments Affecting M&A Deal Structure32
Matching/Topping Rights
The acquiror may negotiate for the right to match or top a Superior Proposal
– Typically structured to permit the acquiror a two or three day period to match or top the competing bid, after notice of the target board’s intention to terminate the merger agreement by reason of a Superior Proposal
– Provides strategic advantage to acquiror, giving it the last opportunity to bid
March 22, 2006
Developments Affecting M&A Deal Structure33
Shareholder Voting/Option Agreements
Where there are meaningful voting blocks held by management or significant shareholders, the acquiror may seek
– A commitment from these shareholders to vote in favor of the transaction
– An option to purchase their shares
– The right to share in profits made from a Superior Proposal
March 22, 2006
Developments Affecting M&A Deal Structure34
Shareholder Voting/Option Agreements
If the obligation to vote in favor of the transaction with the acquiror does not provide the shareholder with the right to terminate the voting agreement upon the withdrawal by the Board of its recommendation of the transaction, and is combined with a force the vote provision, it can serve as a lock-up of the transaction
Board approval of these kinds of agreements will be required to avoid triggering certain “poison pill” provisions” or state statutory provisions such as section 203 of the DGCL
March 22, 2006
Developments Affecting M&A Deal Structure35
Evolution of Delaware Law
March 22, 2006
Developments Affecting M&A Deal Structure36
Omnicare v. NCS Healthcare (Del. Supreme Court, April 2003)
Merger Agreement signed between Genesis Healthcare and NCS as target
Key Deal Protections: a force the vote provision; voting agreements locking up 65% of the vote and the absence of an effective fiduciary out (while the board could withdraw its recommendation, it could not terminate the agreement)
Omnicare, an interloper, made a proposal, subject to due diligence at a higher price than the Genesis transaction
The NCS board concluded that the Omnicare bid was superior but could not terminate the agreement in view of the force the vote provision
March 22, 2006
Developments Affecting M&A Deal Structure37
Omnicare v. NCS Healthcare (Del. Supreme Court, April 2003)
Omnicare sued to enjoin the Genesis merger
Delaware Supreme Court concluded, in a divided decision, that the merger agreement was invalid and unenforceable, as a breach of the fiduciary duties of the NCS board
Applying Unocal standard, the board concluded that the defensive mechanisms, taken together, were coercive
Court refused to defer to the business judgment of the Board
March 22, 2006
Developments Affecting M&A Deal Structure38
Omnicare v. NCS Healthcare (Del. Supreme Court, April 2003)
Court was not influenced by the financial distress that NCS was under or the lengthy search that NCS had undertaken prior to signing the Genesis deal
Uncertainty about deal protection was heightened by the Omnicare decision
March 22, 2006
Developments Affecting M&A Deal Structure39
In re The Mony Group Inc. Shareholder Litigation (Del. Ch. Court, February 2004)
Merger Agreement signed between AXA and MONY, as target
Key Deal Protections: five month window shop provision and $50 million termination fee, equal to 3.3% of equity value
Shareholders sought to enjoin the merger on the grounds that there had been no auction. The Board had simply approved this transaction with a single bidder
Vice Chancellor Lamb upheld the merger agreement because the merger agreement permitted a broad opportunity for a post-merger agreement market check, coupled with a reasonable termination fee
March 22, 2006
Developments Affecting M&A Deal Structure40
Orman v. Cullman (Del. Ch. Court, October 2004)
Merger Agreement signed between Swedish Match and General Cigar, as target
Key Deal Protections: a force the vote provision; voting agreements with the controlling family, in which a majority block agrees to vote in favor of the transaction and not to approve any competing transaction for 18 months
Distinguishing factor from Omnicare: a requirement that the transaction be approved by a majority of the minority stockholders
March 22, 2006
Developments Affecting M&A Deal Structure41
Orman v. Cullman (Del. Ch. Court, October 2004)
Minority stockholder sues to enjoin the merger
Court again applies Unocal, but concludes that the deal protections were not coercive
Here, because of the majority of minority vote, court concludes there was not mathematical certainty that the Swedish Match merger will be approved by the shareholders
But did minority shareholders really have an effective choice in view of the 18 month covenant of the controlling family?
March 22, 2006
Developments Affecting M&A Deal Structure42
Toys “R” Us, Inc. Shareholder Litigation (Del. Ch. Court, June 2005)
Merger Agreement between a KKR group and Toys “R” Us
Key Deal Protections: a break up fee of $247.5 million representing 3.75% of equity value; $30 million expense reimbursement to KKR for a “naked” no vote; KKR gets matching rights in the event of a superior offer
Shareholder sues to enjoin the transaction on the grounds that the combination of the termination fee and the matching rights provided an unreasonably large bidding advantage
Vice Chancellor Strine decides that board acted reasonably and upholds the protections
March 22, 2006
Developments Affecting M&A Deal Structure43
Toys “R” Us, Inc. Shareholder Litigation (Del. Ch. Court, June 2005)
Key factors influencing the decision
– 14 month strategic process that preceded the KKR merger agreement
– Substantial premium to market
– Break-up fees had been heavily negotiated
– Court recognition that deal certainty was important to getting the deal done
March 22, 2006
Developments Affecting M&A Deal Structure44
Toys “R” Us, Inc. Shareholder Litigation (Del. Ch. Court, June 2005)
Important take-aways from this case
– Board determinations should be subject to real time review, not Monday morning quarterbacking
– Movement away from per se rule to reasonableness standard
– Balancing test - the more the board has shopped for buyers before the merger, the more deal protection is acceptable
– Post signing market check was still available; the fact that a small margin topping bid was made nonviable was not fatal
March 22, 2006
Developments Affecting M&A Deal Structure45
What Are the Limits on Locking Up a Deal?
Financially distressed public company
A limited search for buyers has been conducted
One buyer emerges and insists upon the following deal protections:
– A voting agreement from a 35% shareholder
– A "force the vote" provision
– A limited "window shopping" provision
March 22, 2006
Developments Affecting M&A Deal Structure46
Confidentiality Agreements, Engagement Letters and
Indemnity Agreements From an Investment Bank’s Perspective
John M. Carroll
The author is a Managing Director and General Counsel of Rothschild Inc. The views expressed are solely those of the author, and not necessarily the views of Rothschild Inc., Readers should not act upon information in this outline without first seeking professional legal counsel. This outline does not constitute legal advice.
March 22, 2006
Developments Affecting M&A Deal Structure47
Confidentiality Agreements
Purpose
Investment bank’s role
Definition of confidential information
Key provisions
Common carve outs
Permitted disclosures
Remedy provisions
Term of confidentiality obligations
Standstill provisions
Return or destruction of confidential information
Miscellaneous
March 22, 2006
Developments Affecting M&A Deal Structure48
Confidentiality Agreements
Purpose
– To govern the disclosure and use of nonpublic information provided by one party to another in connection with the evaluation of a potential transaction
– To manage conflicting objectives of disclosing party
Investment bank’s role
– Enters into an agreement with a potential client to govern use of nonpublic information and evaluate a potential transaction
– Assists its clients with obtaining confidentiality undertakings from counterparties typically in a sell side mandate
March 22, 2006
Developments Affecting M&A Deal Structure49
Confidentiality Agreements
Definition of confidential information
– Nonpublic information oral or written transmitted by the company
– Any other material or information based upon, derived from or otherwise reflecting such Confidential Information
– The existence, terms and subject matter of the confidentiality agreement or that discussions or negotiations are or may occur with respect to a possible transaction
March 22, 2006
Developments Affecting M&A Deal Structure50
Confidentiality Agreements
Key Provisions
– Generally, Investment Banks, when negotiating a confidentiality agreement with a potential client, focus on:
Carve-outs to the definition of confidential information
Permitted disclosures
Remedy provisions in the event of a breach
Term of the confidentiality agreement
Whether the confidentiality agreement has a standstill
March 22, 2006
Developments Affecting M&A Deal Structure51
Confidentiality Agreements
Common carve-outs
– Information known to or in the possession of the recipient of the information prior to its disclosure to recipient by the disclosing party or its representatives
– Information that is or becomes generally available to the public other than as a result of a breach of the confidentiality agreement by the recipient or its representatives
– Information made available to the recipient by a third party (i.e., other than the disclosing party or its representatives), provided that the source of such information is not known by the recipient to owe a duty of confidentiality to the disclosing party or its representatives with respect to such information
– Information that is independently developed by the recipient or its representatives
March 22, 2006
Developments Affecting M&A Deal Structure52
Confidentiality Agreements
Permitted disclosures
– Disclosures must be permitted to
Employees of the Investment Bank “who need to know” the information to evaluate a possible transaction
Senior management and Investment Banking administrative personnel such as legal and compliance professionals
Third parties in the event of litigation or regulatory or governmental inquiry
It is preferable to be able to also have permitted disclosures to, affiliates, agents, advisors and other representatives
March 22, 2006
Developments Affecting M&A Deal Structure53
Confidentiality Agreements
Remedy provisions
– Irreparable harm - the recipient is typically required to acknowledge that the disclosing party may be irreparably harmed by a breach of the confidentiality agreement and to agree that disclosing party shall be entitled to seek injunctive or other equitable relief on the basis that money damages would provide an adequate remedy at law
– Waiving posting of a bond - recipient is typically required to waive posting of a bond
– Most favored nations clauses - should be strongly resisted
March 22, 2006
Developments Affecting M&A Deal Structure54
Confidentiality Agreements
Remedy provisions (cont’d)
– Indemnification / expense reimbursement - in some circumstances, a disclosing party may require that the recipient indemnify the disclosing party for any losses resulting from a breach of the confidentiality agreement or, at a minimum, reimburse the disclosing party (if the prevailing party) for any expenses and legal fees incurred in connection with its enforcement of (including litigation relating to) the confidentiality agreement
March 22, 2006
Developments Affecting M&A Deal Structure55
Confidentiality Agreements
Term of confidentiality obligations
– Although the disclosing party may argue that a confidentiality agreement should have no term, the disclosing party will generally agree that Confidential Information (particularly financial information) becomes stale relatively quickly and will agree to a term of one to three years, with one year or eighteen months being fairly common. If confidential information consists of proprietary technology or other sensitive intellectual property, then the term may be longer
March 22, 2006
Developments Affecting M&A Deal Structure56
Confidentiality Agreements
Standstill provisions
– Typically required by public companies
– Private companies may also seek some form of “standstill”
– Terms of standstill can include agreement by recipient of confidential information not to (without the disclosing party’s consent) acquire, or commence a tender offer for, securities of the disclosing party or solicit proxies or make any proposal with respect to a business combination
March 22, 2006
Developments Affecting M&A Deal Structure57
Confidentiality Agreements
Standstill provisions (cont’d)
– Investment banks generally cannot agree to standstill provisions in confidentiality agreements on the basis that standstill provisions are inappropriate with respect to financial advisors and often would effectively prohibit them from conducting their ordinary course businesses as financial advisors, sources of financing and financing services, investment managers, investment advisors, private equity investors, traders and lenders, etc. Investment banks are typically not strategic competitors of the disclosing party and the disclosing party should be adequately protected by the use and disclosure restrictions in the confidentiality agreement
March 22, 2006
Developments Affecting M&A Deal Structure58
Confidentiality Agreements
Return or destruction of confidential information
– Upon the disclosing party’s request, the recipient and its representatives must promptly return all written confidential information provided by the disclosing party and destroy all other written confidential information based upon, derived from or other written confidential information. Often, the recipient of the information is permitted to keep one copy of the agreement, for use in the event a dispute arises between the parties or to demonstrate compliance with its obligations
– Some disclosing parties require the recipient and its representatives to certify in writing that they have complied with their obligations to return or destroy confidential information
– An Investment Bank’s ability to comply with such provisions is limited by Rule 17a-4 under the Exchange Act and the Investment Bank’s policies regarding the retention and preservation of certain records, documents, communications and other materials
March 22, 2006
Developments Affecting M&A Deal Structure59
Confidentiality Agreements
Miscellaneous
– Investment bank - facilitates execution of confidentiality agreement between client and potential buyer but should not negotiate agreement on behalf of the client or put itself in the position where it is giving legal advice to the client
– Contacts - the recipient and its representatives cannot contact any representatives of the disclosing party regarding any matters relating to the potential transaction other than individuals specifically designated in writing by the disclosing party
– Process control - the disclosing party typically reserves the right to conduct the sales process in any manner it deems appropriate, to reject any proposal for any reason and to terminate discussions with the recipient at any time, in each case without any liability or obligation to the recipient
March 22, 2006
Developments Affecting M&A Deal Structure60
Confidentiality Agreements
Miscellaneous (cont’d)
– Non solicitation provisions - the disclosing party sometimes requires the recipient to agree not to hire or attempt to hire any employees of the disclosing party for a specified period. Recipients often attempt to limit this restriction so that it only prohibits the solicitation of key employees identified through the due diligence process and does not apply to employees previously known to the recipient, employees who independently approach the recipient or employees who respond to general solicitations not specifically directed at the disclosing party’s employees. Often, the disclosing party may try to extend the non-solicitation covenant to prevent the recipient from soliciting key customers or suppliers of the disclosing party
March 22, 2006
Developments Affecting M&A Deal Structure61
Confidentiality Agreements
Miscellaneous (cont’d)
– Representations and warranties – the disclosing party (including the Investment Bank) makes no representations or warranties regarding the confidential information. The recipient is only entitled to rely upon those representations and warranties set forth in a final definitive transaction agreement. Courts differ on the implications of this provision with respect to allegations of fraud
– No conveyed interests – disclosure pursuant to the confidentiality agreement does not convey to the recipient any property rights or interests in the confidential information provided by the disclosing party. Watch out for attempts by the disclosing party to claim ownership of Investment Bank’s derivative work product
March 22, 2006
Developments Affecting M&A Deal Structure62
Engagement Letters
Scope of engagement
Services to be provided
Fairness opinions
Information
Fees
Definition of transaction
Definition of consideration
Expense reimbursement
Lock-up on additional business
Key man provisions
Term
Fee tail provisions
Timing
March 22, 2006
Developments Affecting M&A Deal Structure63
Engagement Letters
Scope of engagement
– Act as (exclusive) financial advisor in connection with a defined transaction
– Description of contemplated transaction
Sell-side - evaluation of strategic alternatives, including a possible sale
Buy-side - the potential acquisition of a target
– Both the client and Investment Bank should have a clear understanding of the services to be performed by Investment Bank
– The scope and complexity of the services to be provided affects the determination of the appropriate fees
– Services to be performed as requested and if appropriate
March 22, 2006
Developments Affecting M&A Deal Structure64
Engagement Letters
Services to be provided
– Buy-side
Developing a strategy to effectuate an acquisition
Structuring a proposal
Communicating with the seller, including communicating proposals and bids
Conducting due diligence
Understanding the financial implications of a proposed transaction; and
Structuring and negotiating the acquisition
March 22, 2006
Developments Affecting M&A Deal Structure65
Engagement Letters
Services to be provided (cont’d)
– Sell-side
Developing a strategy to effectuate a sale
Reviewing potential sales process alternatives (e.g., auction versus exclusive negotiation)
Preparing and implementing the sales process or marketing plan
Preparing an information memorandum for distribution to potential buyers
Identifying and screening potential buyers
March 22, 2006
Developments Affecting M&A Deal Structure66
Engagement Letters
Services to be provided (cont’d)
Obtaining confidentiality agreements from potential buyers
Coordinating a data room and other activities associated with due diligence activities
Communicating with potential buyers, including responding to proposals and bids
Evaluating proposals received from potential buyers
Understanding the financial implications of a proposed transaction; and
Structuring and negotiating the sale
March 22, 2006
Developments Affecting M&A Deal Structure67
Engagement Letters
Fairness opinions
– Generally
Investment banks often are requested to render a “fairness opinion” in connection with a potential transaction
These opinions address the fairness, from a financial point of view, of the consideration to be paid or received in a transaction (and not the fairness of the transaction itself)
– Opinion Formulation
Buy-side:
– Regardless of whether it is a cash or stock transaction, the opinion should address the fairness to the client from a financial point of view of the consideration to be paid by the client (or exchange ratio if a stock-for-stock merger transaction) in the proposed transaction
March 22, 2006
Developments Affecting M&A Deal Structure68
Engagement Letters
Fairness opinions (cont’d)
Sell-side:
– Asset sale or divestiture of subsidiary: the opinion should address the fairness to the client from a financial point of view of the consideration to be received by the client in the proposed transaction
– Tender or exchange offer or merger transaction: the opinion should address the fairness to the holders of the client’s common stock from a financial point of view of the merger consideration (or exchange ratio if a stock-for-stock exchange offer or merger transaction) to be received by such holders in the proposed transaction
March 22, 2006
Developments Affecting M&A Deal Structure69
Engagement Letters
Fairness opinions (cont’d)
– Carve-outs which should be addressed in the engagement letter:
Affiliates: certain stockholders who are affiliates of the client may be excluded from the opinion (e.g., members of management in an MBO, stockholders who enter into voting agreements, etc.)
Two or more classes of securities: if a sell-side client has two or more classes of common stock, the opinion should only address the fairness (from a financial only point of view) of the consideration to be received by holders of only one class, typically the publicly traded or lower voting right class. Alternatively, the opinion could address the fairness of aggregate consideration
March 22, 2006
Developments Affecting M&A Deal Structure70
Engagement Letters
Fairness opinions (cont’d)
Common stock and preferred stock: if a sell-side client has both common and preferred stock, the opinion should only address the fairness (from a financial point of view) of the consideration to be received by holders of common stock
Timing of payment for opinion services
March 22, 2006
Developments Affecting M&A Deal Structure71
Engagement Letters
Information
– Investment bank must have access to all relevant transaction participant information and personnel
– Investment bank must be able to rely on the accuracy and completeness of all information without independent investigation or verification
– Investment bank must be able to assume that the information, including internal financial forecasts, provided by management was reasonably prepared and represents their best currently available estimates and judgments
March 22, 2006
Developments Affecting M&A Deal Structure72
Engagement Letters
Information (cont’d)
– If street forecasts (rather than internal forecasts) are relied upon, then Investment Bank must have a good faith basis for utilizing such street forecasts (particularly if there are material deviations from the relevant parties’ previously prepared internal forecasts). In addition, management must confirm that the street forecasts reflect reasonable estimates and judgments
– Confidentiality — undertaking should be part of a separate written agreement – not integrated into engagement letter
March 22, 2006
Developments Affecting M&A Deal Structure73
Engagement Letters
Fees
The fee structure and amounts must be tailored to fit specific facts and circumstances. Examples of different types of fees, not all of which may be relevant or appropriate to a given engagement, include
– Financial advisory fee - generally payable upon execution of the engagement letter and/or in periodic installments;
– Opinion fee - payable upon Investment Bank completing the work necessary to render or the rendering of a fairness opinion; and
March 22, 2006
Developments Affecting M&A Deal Structure74
Engagement Letters
The fee structure and amounts (cont’d)
– Transaction fee - payable upon the consummation of the transaction. In a tender/exchange offer or other multi-step transaction, the transaction fee typically becomes payable upon the acquisition of 50% or more of the voting power of the target company's outstanding voting securities
Sell-side - often a percentage of the consideration received, may be subject to a minimum fee
Buy-side - often a fixed fee
March 22, 2006
Developments Affecting M&A Deal Structure75
Engagement Letters
Other fees that may be appropriate include
– Progress fee - generally payable upon achievement of certain progress milestones (e.g., execution of a letter of intent, memorandum of understanding or exclusivity agreement or, for a prospective buyer, the receipt of an invitation to participate in a further round of bidding, commencement of a tender offer, etc.)
– Announcement fee - generally payable upon the first public announcement of a transaction
– Breakup fee - payable upon receipt by the client of a breakup fee in connection with the termination of the transaction agreement
March 22, 2006
Developments Affecting M&A Deal Structure76
Engagement Letters
Definition of transaction
– Any transaction or series or combination of transactions whereby, directly or indirectly, control of, or an interest in, the company or any of its businesses, shares, assets or properties, in whole or in part, are purchased, leased or otherwise acquired, including, without limitation, a sale or exchange of capital stock or assets, a lease of assets with or without a purchase option, a merger or consolidation, a tender or exchange offer, the formation of a joint venture or partnership, a minority interest or any other transaction
Definition of consideration
– The total value of all cash, securities, the repurchase, cancellation or buy-out of any options or warrants, any agreements or other property and any other consideration, including, without limitation, any contingent, earned or other consideration, paid or payable, directly or indirectly, in connection with a transaction
March 22, 2006
Developments Affecting M&A Deal Structure77
Engagement Letters
Expense reimbursement
– In addition, the client must reimburse Investment Bank for its expenses incurred in connection with the engagement (including fees and expenses of legal counsel)
Lock-up on additional business
– Investment banks often request a right of first refusal with respect to certain other M&A transactions or financings, etc. undertaken by the client in connection with or as a result of the contemplated transaction or during a defined period (typically one or two years following completion or termination of an engagement)
March 22, 2006
Developments Affecting M&A Deal Structure78
Engagement Letters
Key man provisions
– Should be strongly resisted
Term
– Typically include evergreen provision
– Either Investment Bank or the client may terminate the engagement, but termination of the engagement does not relieve the client from its obligation to pay accrued fees or reimburse for accrued expenses
March 22, 2006
Developments Affecting M&A Deal Structure79
Engagement Letters
Fee tail provisions
– Investment Banks are generally entitled to receive a transaction fee if a transaction is consummated or agreed to within a specified period (typically two years) following the termination of an engagement
– Scope of tail coverage may vary
Timing
– Investment Bank generally requires that an engagement letter be signed prior to commencing substantive work on the engagement to ensure that there is a clear understanding of the terms of the proposed engagement and that Investment Bank has the benefit of a release and indemnity covering any advice and services rendered
March 22, 2006
Developments Affecting M&A Deal Structure80
Indemnification Agreements
Much more than just indemnification
Indemnity
Expense reimbursement
Contribution
Cap on Investment Bank’s liability
Settlement issues
Assumption of defense
Waiver of jury trial
Jurisdiction/governing law
March 22, 2006
Developments Affecting M&A Deal Structure81
Indemnification Agreements
Much more than just indemnification
Indemnity - indemnified persons are indemnified by the client both for third party claims and client for any losses, claims, damages or liability (“losses”) related to or arising out of the engagement, except, in certain circumstances, to the extent it is finally judicially determined that such losses resulted from the indemnified person's bad faith or gross negligence
– Definition of indemnified persons includes Investment Bank as well as the officers, directors, agents (including legal counsel), and employees of Investment Bank and its affiliates
March 22, 2006
Developments Affecting M&A Deal Structure82
Indemnification Agreements
Indemnity - indemnified persons are (cont’d)
– Although the indemnity covers related activities prior to the date of the engagement letter, it is good practice to date the indemnity and the engagement letter "as of” the date when substantive advice or work product was first provided to the client
March 22, 2006
Developments Affecting M&A Deal Structure83
Indemnification Agreements
Expense reimbursement - also provides for expense reimbursement incurred by Investment Bank in investigating, preparing for or defending any action, claim, investigation or other proceeding related to or arising out of the engagement
Contribution - if a court determines not to uphold the indemnification, then the contribution provisions act as a fallback position allocating losses based on the relative benefits and/or fault of the client and Investment Bank
March 22, 2006
Developments Affecting M&A Deal Structure84
Indemnification Agreements
Cap on Investment Bank’s liability
– Typically Investment Bank’s liability for losses is capped at the fees actually paid to Investment Bank in connection with the engagement
Settlement issues - the client may not settle any proceeding without Investment Bank’s consent (whether or not Investment Bank is a named party in such proceeding). Often the client will ask that that this provision be mutual
March 22, 2006
Developments Affecting M&A Deal Structure85
Indemnification Agreements
Assumption of defense - sometimes a client will request the right to assume the defense of any proceeding
Waiver of jury trial
Jurisdiction/governing law – typically, the engagement letter and indemnification agreement are governed by New York law and the parties consent to exclusive jurisdiction of the New York courts
March 22, 2006
Developments Affecting M&A Deal Structure86
M&A Tax Concerns: The Basics and Beyond
Michael Hirschfeld
March 22, 2006
Developments Affecting M&A Deal Structure87
Today We Will Discuss:
The Internal Revenue Code of 1986, as amended, and the following sections therein: 1, 11, 61, 301, 302, 311, 331, 332, 351, 354, 356, 358, 361, 368, 511, ,512, 513, 514, 701, 702, 704, 721, 722, 731, 732, 734, 743, 751, 861, 862, 864, 871, 872, 881, 884, 892, 1001 and 7701
Even more treasury regulations
And many other things!
March 22, 2006
Developments Affecting M&A Deal Structure88
The Essence of M&A Tax Concerns
March 22, 2006
Developments Affecting M&A Deal Structure89
Types of Entities
Corporation
– Fully taxable C corporation
– S corporation
Partnership
– General partnership
– Limited partnership
– Limited liability company
Non-US entities
March 22, 2006
Developments Affecting M&A Deal Structure90
State and Local Tax Burden
New York
– Corporate tax
NYS-Corporate Franchise Tax-7.5%
NYC-Corporate Income Tax-8.85%
– Individual tax
NYS-6.85% (over $40K)
NYC-4.45% (over $500K)
– NYS & NYC real property transfer tax
March 22, 2006
Developments Affecting M&A Deal Structure91
Corporate Taxable Acquisitions
Starting point-tax free deal does not work, but why?
– Seller wants cash
– Buyer wants step up in basis
– Separation of businesses
March 22, 2006
Developments Affecting M&A Deal Structure92
Buyer’s Perspective
Asset acquisition
– Preferred option
– Avoid unknown liabilities
– Get “step up” in tax basis
Added tax depreciation/amortization
Less tax on later sale of assets
Stock acquisition
– Generally, no step up in tax basis
– May be good, however, if NOL exists
March 22, 2006
Developments Affecting M&A Deal Structure93
Seller’s Perspective
Asset acquisition
– Double level of tax discourages this
– Pay full tax on appreciation
– State & local taxes can also apply
Stock acquisition
– Single level of tax-capital gains rates apply
Midco deals
– Listed transaction. IRS Notice 2001-16
March 22, 2006
Developments Affecting M&A Deal Structure94
Asset Acquisition:What Are You Buying?
GOODWILL is a common but confusing ingredient
Let’s divert there for a moment
March 22, 2006
Developments Affecting M&A Deal Structure95
Goodwill
Sometimes, the tax law and the financial world take a different view of life
The treatment of goodwill is one such place
March 22, 2006
Developments Affecting M&A Deal Structure96
Goodwill & Tax
Applies to Section 197 assets
Provides for a 15 year write off
– Straight line
– What do you allocate to goodwill-HOLD THAT FOR A MOMENT
Plus, anti-churning rules can alter this
March 22, 2006
Developments Affecting M&A Deal Structure97
Section 197 Assets Include
Any license, permit, or other right granted by a governmental unit or an agency or instrumentality thereof;
Any covenant not to compete entered into in connection with an acquisition of an interest in a trade or business;
Any franchise, trademark or trade name;
March 22, 2006
Developments Affecting M&A Deal Structure98
As Well As
The workforce in place, including its composition and terms and conditions of its employment;
Business books and records, operating systems, or any other information base (including lists or other information with respect to current or prospective customers);
Any patent, copyright, formula, process, design, pattern, know-how, format, or other similar item;
March 22, 2006
Developments Affecting M&A Deal Structure99
And There Is More
Composition of market, market share, any other value resulting from future provision of goods or services pursuant to relationships in the ordinary course of business with customers, or, in the case of a financial institution, deposit base and similar items;
Any value resulting from future acquisitions of goods or services pursuant to relationships in the ordinary course of business with suppliers of goods or services to be used or sold by the taxpayer; or
Any other similar item
March 22, 2006
Developments Affecting M&A Deal Structure100
Goodwill & GAAP
No deduction for GAAP-FASB 142
– Scope of goodwill is an issue; residual method
You annually record losses on “impairment”
– Difficult to determine
– Carrying value exceeds fair value then apply impairment test. Based on discounted net cash flow method/comparable company transactions
Create a “deferred tax” liability
– Future tax on reversal, e.g., sale or impairment
March 22, 2006
Developments Affecting M&A Deal Structure101
Let’s Get Back To The Topic
• Allocation of purchase price
• IRS Form 8594, Asset Acquisition Agreement
March 22, 2006
Developments Affecting M&A Deal Structure102
Allocation of Purchase Price
Required for:
– Applicable asset acquisition: any transfer of assets that constitute a trade or business, with respect to which the transferee’s basis in the assets is determined wholly by reference to the consideration paid for the assets
– An applicable asset acquisition excludes stock acquisitions
March 22, 2006
Developments Affecting M&A Deal Structure103
Installment Sales
Possible tax deferral
Interest charge rule: $5M Note bullet
Pledge rule:
Inapplicable to: dealer property, inventory, readily tradable stock or securities
Escrows: typically, treated as paid
March 22, 2006
Developments Affecting M&A Deal Structure104
FIRPTA
Beware of foreign investors
FIRPTA closed the door on no US taxation of realty income
But, it can even apply to stock purchase
March 22, 2006
Developments Affecting M&A Deal Structure105
Stock Purchase
You agree to a stock purchase
Any special concerns?
March 22, 2006
Developments Affecting M&A Deal Structure106
Stock Purchase
You can buy stock outright OR
You can create a sub and merge it into target and cash out the target stockholders
PhantomSub
TargetMerger
TargetShareholders
March 22, 2006
Developments Affecting M&A Deal Structure107
Stock Purchase
You can buy stock outright OR
You can combine stock redemption with stock purchase
– Zenz case
– Part redemption followed by sale of remaining stock treated as if all stock was sold
March 22, 2006
Developments Affecting M&A Deal Structure108
Stock Acquisition: What Are You Buying?
Sometimes, a stock purchase can be an asset purchase
Magic of Section 338(h)(10)
March 22, 2006
Developments Affecting M&A Deal Structure109
The (h)(10) Requirements
Qualified Stock Purchase
– Within 12 month period, purchases 80% or more of target’s stock, that is, vote and value
– Taxable sale required
Both buyer and target must be corporations
Only works if:
– Target is an S Corporation OR
– Target is a member of a group of affiliated corporations
March 22, 2006
Developments Affecting M&A Deal Structure110
The (h)(10) Impact
Target treated as if it sold 100% of its assets in a fully taxable transaction
– For example, if you buy 80% of stock, you can make the election, but seller picks up 100% of the gain
Seller’s view
– Any more gain than if I did not elect?
– Any different tax rate?
March 22, 2006
Developments Affecting M&A Deal Structure111
Sell Foreign Sub
Section 1248: May recast some gain as ordinary income if accumulated E&P
If buy foreign corporation, can make Section 338(g) election to treat it as a deemed sale of assets by old target to new target followed by stock sale
– Good for buyer: step up in basis
– Possibly bad for seller: if foreign corp. is a CFC then deemed asset sale may trip up some tax worries for seller
March 22, 2006
Developments Affecting M&A Deal Structure112
Financing
Debt financing tax issues
– PIK debt
– HYDO
– Earnings stripping
– Payable in equity
– Withholding tax concerns
– Other concerns
March 22, 2006
Developments Affecting M&A Deal Structure113
PIK Debt
Payable in kind
You can be taxed even if you do not get cash
– Original Issue Discount or OID
– Market discount rules
Is it good debt for tax purposes?
March 22, 2006
Developments Affecting M&A Deal Structure114
HYDO
High yield debt obligations
– More than 5 year maturity
– High interest rates
AFR + 5% - deferral
AFR + 6% - no deduction
– Significant OID
Must pay up accrued interest after 5 years so that you are left with only one accrual period of interest not paid to date
March 22, 2006
Developments Affecting M&A Deal Structure115
Earning Stripping Rules
Earnings Stripping
Rule:
No deduction for:
– DISQUALIFIED INTEREST EXPENSE
but only to extent of
– EXCESS INTEREST EXPENSE
and
– only if Debt-Equity Ratio is greater than 1.5:1
March 22, 2006
Developments Affecting M&A Deal Structure116
Debt Payable in Equity
2004 Tax Act addition
– If substantial portion of interest may be paid in equity, then no deduction even if pay the interest in cash
March 22, 2006
Developments Affecting M&A Deal Structure117
Withholding Concerns
Payable to Non-US investor
– 30% withholding tax
– Portfolio interest exemption
– Tax treaty relief
– “Gross up” clause
March 22, 2006
Developments Affecting M&A Deal Structure118
Other Concerns
Section 279-Deduction lost for:
– Debt incurred to buy stock or equity if (i) subordination, (ii) convertible & (iii) 2:1 or greater debt equity ratio
CERT
– Limits carry back of interest expense to pre acquisition periods
Tax exempt income
March 22, 2006
Developments Affecting M&A Deal Structure119
And Now, Let’s Discuss
Drafting the documents
March 22, 2006
Developments Affecting M&A Deal Structure120
Drafting
Reps and warranties
Indemnification
Filing of returns
Section 338(h)(10) election
FIRPTA, sales tax, transfer tax forms
DUE DILIGENCE REVIEW
March 22, 2006
Developments Affecting M&A Deal Structure121
Tax Free Transactions
Alphabet soup of reorganizations
Stock is the key to making it tax free, but not the only key
March 22, 2006
Developments Affecting M&A Deal Structure122
Why Go This Way?
Buyer
– Cheap alternative to cash
– But no step up in tax basis
Seller
– Tax deferral
But where will capital gains rates be?
– But if a loss will arise, make it taxable
March 22, 2006
Developments Affecting M&A Deal Structure123
Tax Free Transactions
A-statutory merger + not too much cash
B-stock swap + only voting stock
C-asset acquisition + voting stock/little boot
Triangular reorgs-the way to usually go:
– Forward triangular (a)(2)(D)-Target merges into buyer sub + stock & not too much cash
– Reverse triangular (a)(2)(E)-Buyer’s sub merges into target + 80% or more stock
March 22, 2006
Developments Affecting M&A Deal Structure124
Other Tax Free Reorgs
D-divisive reorganizations
– Spin off, split off and split up
E-Recapitalization
F-Mere change
G-Title 11 case
Code Section 351 – mixing bowl
Preferred stock – added concern
March 22, 2006
Developments Affecting M&A Deal Structure125
S Corporations
More traps to use than for a partnership or LLC
However, can use tax free reorg. rules or make Section 338(h)(10) election
March 22, 2006
Developments Affecting M&A Deal Structure126
Partnerships
Special considerations
The tax free reorg rules do NOT apply to partnerships
March 22, 2006
Developments Affecting M&A Deal Structure127
Partnership Oops!
Convert a C Corporation into an LLC-oops!
– Taxable event
Merge S corporation into an LLC-oops!
– Taxable event
However, convert an LLC into a corporation in anticipation of an IPO
– Generally, not taxable but watch out for liabilities
March 22, 2006
Developments Affecting M&A Deal Structure128
Seller & PS Sale
Gain/loss-sale of capital asset
Major exception: Section 751(a)
– Unrealized receivables
– Inventory Items
– But, will do this later
Basis increased by share of current income/loss
March 22, 2006
Developments Affecting M&A Deal Structure129
Holding Period: Do You Really Have Long Term Gain?
Fragmentation approach to holding period
Example: Longstanding ABC PS with total FMV = $300x
A, B & C each now contribute $25x cash
New holding period for 1/5th of their interest ($25x $125x)
March 22, 2006
Developments Affecting M&A Deal Structure130
Buyer’s Tax Impact
Cost basis for PS Interest but including share of PS liabilities
By death: FMV at date of death plus share of liabilities
By gift: carryover increased by gift tax paid
What is the impact on basis of underlying PS?
March 22, 2006
Developments Affecting M&A Deal Structure131
Buyer Aid: Section 754 Election
Purchase of a PS interest does NOT affect tax basis of appreciated “inside” assets unless Section 754 election in effect
If so, Section 743 adjusts allocable basis
Good to make: Why? If “outside” basis allocable “inside” basis then it equalizes the two
Bad: If “outside” basis allocable “inside” basis BUT may be forced to use!
March 22, 2006
Developments Affecting M&A Deal Structure132
Disguised PS Interest Sales
November 26, 2004: Proposed Regulations Issued: After 20 years, we have guidance!!!
What happens before regs go final?
– FSA 200024001, Feb. 8, 2000; transaction recast as a disguised sale of a partnership interest
– TAM 200037005 & ILM 200250013
March 22, 2006
Developments Affecting M&A Deal Structure133
Why Disguised Sale Regs?
AB PS: Gross PS Asset’s FMV = $6M, AB = $2M & non-recourse debt of $4M
A and B each have $1M AB for PS interest
A sells her 50% interest to C for $1M
A had AR =$3M and Gain of $2M
ALTERNATE: Admit C as new partner for $99 and $99 goes out to A with C having 49.5% PS interest and A having .5% PS interest
Without these rules: A can avoid all tax!
March 22, 2006
Developments Affecting M&A Deal Structure134
Mixing Bowl Transactions
Partnerships can allow for “pooling” of resources in a tax free manner
– These are the mixing bowl transactions
But, watch out for rules that can tax you unexpectedly on an exit or partial withdrawal
– Disguised sale
– Contributed property rules
March 22, 2006
Developments Affecting M&A Deal Structure135
Anti-Mixing Bowl Rules
Section 737-distributions to contributing partner
Section 704(c)(1)(B)-distribution of contributed property
Section 707 disguised sale rules
March 22, 2006
Developments Affecting M&A Deal Structure136
Corporate Inversions
A US Holding Company owning non-US subs results in US taxation of those subs income
Inversion transactions are structured so as to remove the US holding company from the chain of command (Stanley, etc.)
New law restrictions!
March 22, 2006
Developments Affecting M&A Deal Structure137
March 22, 2006
Developments Affecting M&A Deal Structure138
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein