USA Law and Practice Contributed by: Vijay Sekhon, Brien Wassner, John Godfrey and Justin Macke, Sidley Austin LLP
• market and proxy adviser expectations (including fairness opinions). Premiums of 20–40% over unaffected trading prices are typical to secure board and shareholder support. 7.5 Conditions in Takeovers US tender offers may include reasonable, objectively determinable conditions, but cannot include a financ - ing-out. The bidder must be in a position to “promptly pay” upon offer closing. Common Conditions The following conditions are common: • minimum tender (eg, more than 50% of shares); • regulatory approvals (HSR, CFIUS); • absence of a material adverse effect; and • bring-down of target representations and compli - ance with covenants. Deal Protections Deal security measures include the following: • match rights and information rights; • non-solicitation or no-shop clauses (subject to fiduciary outs); and • reverse termination fees, particularly where a newco is used as the bid vehicle or there is debt financing. 7.6 Acquiring Less Than 100% Where the sponsor acquires less than full ownership in a private transaction, it may negotiate governance rights such as board seats, consent rights over major decisions and access to financial information. These rights are usually formalised through equity holders’ agreements or charter documents. Debt push-downs typically require majority or full con - trol of the operating company. Without full ownership, legal and fiduciary constraints may limit the ability to guarantee or assume acquisition debt. Squeeze-Out Mechanisms The following squeeze-out mechanisms are available after a successful offer.
• Section 251 (h) – Allows a follow-on merger without a vote once the buyer holds a majority of shares through a tender. • Section 253 – Permits a short-form merger if the buyer owns 90% or more post-close. Where these thresholds are not met, a long-form merg - er and shareholder vote may be required, increasing Private equity sellers generally have drag-along rights over co-investors to force the sale of a portfolio com - pany. Irrevocable voting or tender agreements from major shareholders are common in sponsor-led public take - overs. These agreements are typically negotiated con - currently with the merger agreement and can provide crucial execution certainty, but Delaware corporate law limits pre-closing voting agreements by control - ling shareholders in mergers. Terms usually include: • a commitment to vote in favour of the merger or tender shares into the offer; • transfer restrictions during the offer period; • limited fiduciary outs (for insider shareholders, if applicable); and • bundled rollover and governance arrangements where the shareholder is participating post-close. Institutional shareholders rarely negotiate outs unless they are insiders. For management shareholders or board members, fiduciary exceptions may apply in the event of a competing superior offer. execution timing and litigation risk. 7.7 Irrevocable Commitments 8. Management Incentives 8.1 Equity Incentivisation and Ownership Equity incentivisation is a standard feature in US private equity transactions. Management participa - tion is structured to align interests with the sponsor, retain key talent and support long-term value crea - tion. Management teams typically receive 10–15% of the fully diluted equity in the post-closing structure,
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