Mergers & Acquisitions

Due Diligence | Part 3 | Financial Issues

In last week’s post we discussed the legal issues surrounding due diligence. This week we continue our Purchase and Sale of a Business series and due diligence series by discussing some essential financial issues to consider during the due diligence phase of purchasing a business.

Avoid a Headache; Know the Financials In and Out The last thing you want to do is purchase a company with disorganized books and a lack of financial records. Not only will you spend time and money sorting out the books and reconciling the financial records, you’ll also likely inherit “surprise debt” or other financial liabilities. By taking the time to review the company’s books and learn more about its financial condition, you’ll avoid a headache or two...

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Mergers & Acquisitions

Due Diligence | Part 2 | Legal Issues

In the introduction to due diligence, we explained the importance of engaging in extensive due diligence prior to purchasing a business, and we broke down due diligence into six categories. Today’s post will highlight the key legal issues the purchaser should be aware of when purchasing a business.

Reviewing the Owner’s Governing Documents Prior to any acquisition, the purchaser will need to know the basic organizational structure of the business, i.e. how it was formed, its governing documents, and its key personnel. Knowing how the business is organized will dictate how the transaction will be structured.

Securities Matters Is the purchase going to be structured as a stock purchase? How many shareholders currently own stock in the company? Is there a shareholder agreement? Are...

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Mergers & Acquisitions

SEC Gives Thumbs Up for Company Announcements Through Social Media

The SEC issued a report that makes it clear that companies can use social media platforms, e.g. Facebook and Twitter, to announce key information to investors to comply with Regulation Fair Disclosure (Regulation FD) so long as the investors have been alerted about the announcement and which social media outlet being used.

The SEC’s report confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. In 2008, the SEC issued guidance that clarified that websites can serve as effective means of communication to announce information to investors so long as the investors are aware of where to find the information.

Regulation FD requires companies to distribute...

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Mergers & Acquisitions

Due Diligence | Part 1 | An Introduction to the Series

“By failing to prepare you are preparing to fail.” This great Benjamin Franklin quote is a helpful point of reference for understanding why due diligence is so important  in the purchase and sale of a business. The buyer needs to make sure he or she knows exactly what he or she is purchasing. Due diligence offers the purchaser an opportunity to get to know the seller’s company and avoid being caught off guard by an undisclosed or undiscovered issue after the company is acquired. If the buyer fails to thoroughly complete the due diligence process, it is very likely that person will be disappointed in his or her investment.

The due diligence process allows the purchaser to identify the risks with...

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Mergers & Acquisitions

Purchase and Sale of a Business: Preliminary Agreements

In this post in the purchase and sale of a business series, we discuss the preliminary agreements the parties generally consider as part of the business purchase. We’ll refer to the party selling the company as the owner, and the party acquiring the company as the purchaser. If you read about these transactions in other blogs or articles you might also find the selling party referred to as the target company and the acquiring party as the acquirer.

In the preliminary stages of the purchase and sale of a business there are a few primary concerns: (1) the owner wants to make sure that the potential purchaser is serious, (2) the owner wants to make sure the secrets of his or her...

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Mergers & Acquisitions

Purchase and Sale of a Business

The purchase and sale of a business is one of the most important transactions for business owners. We’re starting a blog series to let you know more about how the process of purchasing or selling a business works. As a side note, lawyers often call these types of transactions mergers and acquisitions, especially when referring to transactions involving extremely large companies. Mergers and acquisitions are essentially just the purchase and sale of a business but generally on a larger scale and with more moving parts.

We’re going to discuss the purchase and sale process from start to finish. For each post we’ll explain what’s at stake and how your lawyer can help you. For this series we have scheduled posts on...

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Mergers & Acquisitions

AB InBev in the Middle of the Record Flood of Antitrust Suits

Anheuser-Busch InBev NV’s $20.1 billion proposed takeover of Mexican beer distributor Grupo Modelo SAB has come to a halt after the Justice Department has filed suit to block the merger. This suit comes as part of a flurry of civil antitrust cases, signalling what many some believe to be the Obama administration’s increased willingness to intervene in the markets.

Currently there are seven antitrust cases in litigation, the most ever at one time. A spokeswoman for the Justice Department stated, “if the parties are not willing to offer a remedy or enter into a settlement that resolves our competitive concerns, we are prepared to litigate.”

This attitude is in stark contrast to the Bush administration. There was far less emphasis on the...

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Mergers & Acquisitions

Another One Bites the Dust: AT&T, T-Mobile Decide to Abandon Merger

Just days after former U.S. Congressman and long-time merger supporter Rick Boucher began his rally cry behind the advancement of the AT&T and T-Mobile merger, AT&T has released a statement of its intent to give up on progressing with the merger. Believed by many to be on its last legs for much of the past several months, the merger appears now to be officially dead. AT&T released the following statement, in part:

“The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished...

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Mergers & Acquisitions

Latest Update- AT&T and T-Mobile move to re-structure the failing merger

Yesterday AT&T released a statement that it will attempt to restructure the T-Mobile acquisition in order to achieve the necessary regulatory approvals. AT&T is working closely with Deutsche Telekom, T-Mobile’s parent company, to find a way to revise the current transaction. This news comes just a day after Deutsche Telekom and AT&T appeared before the judge to request the court proceedings to be delayed to allow the two companies time to evaluate the current available options for the deal. The Justice Department weighed in on the situation, arguing that an expedited trial is no longer necessary since AT&T pulled its merger application from the FCC.

Meanwhile, Deutsche Telekom is looking to other options for selling off T-Mobile, including cable and satellite...

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Mergers & Acquisitions

AT&T upset over FCC’s ‘unfair’ report on the T-mobile takeover

Just two days after the FCC released its lengthy report depicting significant harms the public may face as a result of the AT&T proposed takeover of T-mobile, AT&T fired back by releasing a statement the labels the FCC report as a “one-sided…advocacy piece, and not a considered analysis.” AT&T accused the FCC as cherry-picking facts to support its position, and failing to provide the entire picture in an unbiased manner. In the report, the FCC claims that the merger would cause substantial harm to competition and consumers, including costs for customers, reduced incentives for innovation and decreased consumer choices. AT&T claims this is untrue and claims the FCC omitted certain facts that do not support its position. To bolster its...

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