USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
Schedule 13D unless they are eligible to use Schedule 13G. The shorter-form Schedule 13G is available to passive investors meeting certain requirements. A beneficial owner of a security includes any person who, directly or indirectly, has or shares either: • the power to vote or to direct the voting of the security; or • the power to dispose or direct the disposition of the security. A Schedule 13D must be filed five business days after acquiring beneficial ownership of more than 5% of the outstanding shares of a class of voting equity securi- ties or losing Schedule 13G eligibility, and Schedule 13D amendments must be filed within two business days after the triggering event. 6.2 Mandatory Offer Federal securities laws and Delaware laws applicable 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 target company’s remaining shares. 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 demand that the acquirer purchase their shares at a fair price. 6.3 Transaction Structures The most common means of acquiring a US public company are mergers and tender offers. One-Step Merger A merger is a combination of two entities by operation of law in accordance with the statutory corporate law of the states of the constituent entities. The shares of the target are converted into the merger consideration (which may be cash, securities or other property) pur- suant to a merger agreement that sets forth the terms and conditions of the acquisition. This is approved by the acquirer’s and the target’s board of directors and is subsequently adopted by the target shareholders (generally by the holders of a majority of the outstand- ing shares) at a shareholders’ meeting.
Assuming target shareholder approval, the acquirer can complete the merger quickly, typically closing on the day that shareholders approve the transaction or the following day. Two-Step Merger (With Tender Offer) A tender offer is a direct offer to the target company’s shareholders to purchase their shares. Not all tar- get company shareholders are likely to tender their shares into the tender offer. Therefore, for a bidder to acquire all the target’s shares, a tender offer is inevi- tably a multi-step transaction, whereby, following the initial purchase of shares in the tender offer meeting a requisite threshold, the remaining target company shareholders 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 target company’s board of directors will be required, under other SEC rules, to state its position on the tender offer. 6.4 Consideration and Minimum Price See 4.3 Liquidity Event: Form of Consideration . 6.5 Common Conditions for a Takeover Offer/ Tender Offer Generally, tender offers will be conditional upon: • the tender of a certain minimum number of target company shares; • receipt of applicable regulatory approvals and expiry of applicable waiting periods; • there being no injunction, government order or law prohibiting the transaction; and • there being no material adverse change in the target company. A hostile tender offer will also often require: • removal of anti-takeover defences;
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