Mergers and Acquisition Final Outline
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:
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: