USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang, Gregory Gewirtz and Vinita Sithapathy, Linklaters
2. Overview of Regulatory Field 2.1 Acquiring a Company
ant to operation of law, all of the shares of the target company are converted into the right to receive the merger consideration (which may be cash, securities or other property). Tender offer A tender offer is a direct offer to the shareholders of the target company to purchase their shares. There - fore, it is highly likely that not all of the shareholders of the target will tender their shares into the tender offer. For a bidder to acquire all of the shares of the target, a tender offer is inevitably a multi-step transaction, whereby, following the initial purchase of shares in the tender offer meeting a requisite threshold, the remain - ing shareholders of the target have to be “squeezed out” through a second-step statutory merger. Because a tender offer is an offer made directly to the shareholders, no board of directors’ approval from the target company is technically required, although most friendly tender offers are made pursuant to a board- approved merger agreement. Most hostile transac - tions involve a tender offer because the acquirer can bypass the target’s board of directors and manage - ment. In any event, the board of directors of the tar - get company will be required under other rules of the Securities and Exchange Commission (SEC) to state its position on the tender offer. 2.2 Primary Regulators The state law of the target company’s jurisdiction of incorporation will govern many aspects of an acqui - sition, including substantive requirements of fairness on the transaction and provision of target company anti-takeover defences, such as the ability to imple - ment shareholder rights plans (ie, “poison pills”). In contrast, US federal law relating to acquisitions is generally part of the US securities laws and regula - tions and is mostly focused on adequacy of disclosure relating to the proposed transaction, the tender offer process or proxy solicitations. Federal securities laws applicable to public companies and the sale and pur - chase of securities are administered and enforced by the SEC; alleged violations of state corporate law are typically challenged by private plaintiffs in state courts (private plaintiffs also often challenge violations of fed - eral securities laws in federal courts). State securities (aka “blue sky”) laws may also be applicable depend -
A stock purchase, asset purchase, merger or tender offer are the common transaction structures that can
be used to acquire a US company. Acquisitions of Private Companies
An acquisition of a private company is often struc - tured as a stock or asset purchase, but may need to be structured as a merger transaction if the company has a larger number of shareholders. Stock purchases A stock purchase is a typical method for acquiring all or part of a private company, or a division of a pri - vate company whose business is conducted through a subsidiary, where the buyer will purchase the stock of a target company from the seller shareholder(s). To acquire all of the target’s stock, all shareholder(s) need to be party to the transaction pursuant to a stock purchase agreement. Asset purchases An asset purchase is often used to acquire select assets or a division of a target company where the buyer will purchase identified assets and assume identified liabilities of the target company pursuant to an asset purchase agreement. The asset purchase structure allows parties to exclude specific assets and liabilities, which is a key negotiation point in an asset purchase deal. Acquisitions of Public Companies The most common means of acquiring a US public company are via a merger and/or tender offer. One-step merger A merger is a combination of two entities by opera - tion of law, in accordance with the statutory corpo - rate law of the states of the constituent entities, and pursuant to a merger agreement that sets forth the terms and conditions of the acquisition; it is approved by the boards of directors of the target and acquirer and then subsequently adopted by the target’s share - holders (generally by the holders of a majority of the outstanding shares) at a shareholders’ meeting. A merger is a single-step transaction, whereby, pursu -
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