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
the target company; see 4. Stakebuilding . However, a few states – eg, Pennsylvania – have adopted “control share cash-out” statutes, whereby once an acquirer obtains control (ie, exceeds a certain threshold of voting power) the other target company shareholders may make a demand on the acquirer to purchase their When acquiring a company that is publicly traded in the United States, the proposed offer may be in the form of an exchange offer (ie, equity share offer), a cash offer or a combination of the two. Where the bidder is a private company or is not publicly traded in the USA – for a majority of acquisitions of US publicly traded companies – the consideration included in the bid is entirely cash. shares at a fair price. 6.3 Consideration Where there is a significant gap regarding valuation of the target company or in a deal environment or industry with high valuation uncertainty, parties may structure the purchase price such that they pay a lower price for the target company upfront but then make certain specified additional earn-out payments when certain business milestones are attained. These milestones may be tied to sales, revenue or, in cer - tain industries such as biotech, regulatory approval of products developed or owned by the target. Alter - natively, the acquirer may offer some of its stock as part of the consideration (in combination with cash) so that target company shareholders pre-acquisition can indirectly benefit from the post-acquisition success of the target company. 6.4 Common Conditions for a Takeover Offer Generally, tender offers will be conditioned on: • tender of a certain minimum number of target com - pany shares; • receipt of applicable regulatory approvals and expiry of applicable waiting periods; • no injunction, government order or law prohibiting the transaction; and • there being no material adverse change with respect to the target company. In addition to the foregoing, a hostile tender offer will often require:
Signing of the transaction agreement generally follows shortly after the seller’s receipt of the final bids and selection of the winning bidder. Antitrust Waiting Period
See 2.4 Antitrust Regulations . Long-Form (One-Step) Mergers
Where the target is a publicly traded company and the transaction is effected through a one-step merger (see 2.1 Acquiring a Company ), to solicit the required shareholder vote, the target must prepare and file a detailed “proxy statement” with the SEC that complies with the SEC’s proxy rules. It typically takes up to two weeks to draft and file the initial proxy statement. The proxy statement may not be disseminated to share - holders until the SEC staff has commented on it and all such comments have been resolved, which may take several additional weeks. Upon finalisation, the target then mails the proxy state - ment to its shareholders and files the final version with the SEC. State law, the target’s constitutional docu - ments and rules of the applicable stock exchange will dictate the minimum length of time between the mailing of the proxy materials and the date of the tar - get company shareholders’ meeting to approve the merger, though it is typically 20 business days. Assuming shareholder approval, the acquirer can then complete the merger rather quickly. Typically, such transactions close on the day that the shareholders approve the transaction or on the following day. Tender Offer Generally, a cash tender offer (see 2.1 Acquiring a Company ) takes only 30 to 60 days to close after the time that the definitive documents are executed; see 5.5 Definitive Agreements . However, the timeline for any tender offer or one-step mergers may be signifi - cantly impacted by regulatory clearances – eg, anti - trust and CFIUS. 6.2 Mandatory Offer Threshold US federal securities laws and Delaware law appli - cable to tender offers do not require an acquirer that obtains a given threshold of the target company’s shares to make an offer for the remaining shares of
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