USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters LLP
3.2 Choice of Listing If a US company decides to go public, it will likely choose a US exchange, particularly if its shareholder base is primarily domestic. US exchanges offer significant market liquidity and are integral to global financial activities, making them attractive for capital raising and trading. 3.3 Impact of the Choice of Listing on Future M&A Transactions US-based companies rarely choose to list on foreign exchanges. When they do list on a for- eign exchange (especially if some of their securi- ties are held by US investors), complex issues can arise, including conflicts of law and com- pliance challenges with the regulations of the target country. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process To achieve the highest price and optimal terms, sellers frequently employ auction processes to generate momentum. During an auction, sellers will give potential buy- ers a confidential information memorandum, and the potential buyers submit their initial indica- tions of interest thereafter. Potential buyers then normally submit their markup of the auction draft as part of their final bid, typically four to eight weeks after the initial indications of interest. Signing of the transaction agreement generally follows shortly after the seller’s receipt of the final bids and selection of the winning bidder. 4.2 Liquidity Event: Transaction Structure A typical transaction structure for the sale of a privately held technology company with multi-
ple investors is usually carried out as a merger, asset purchase or stock purchase. Companies may also sell a controlling interest while offering investors the choice to remain shareholders. 4.3 Liquidity Event: Form of Consideration For acquisitions involving a private target, the consideration is often all cash payments; how- ever, if a buyer is publicly traded, consideration could also consist of a mix of cash and stock, or all stock. Where there is a significant gap regarding valua- tion of the target company, parties may structure the purchase price such that they pay a lower price for the target company upfront but then make additional earn-out payments when cer- tain business milestones are attained. These milestones may be tied to sales, revenue, or, in certain industries such as biotech, regulatory approval of products developed or owned by the target. Alternatively, the buyer may offer some of its stock as part of the consideration so that target company shareholders pre-acquisition can indirectly benefit from the post-acquisition success of the target company. 4.4 Liquidity Event: Certain Transaction Terms Negotiation of Indemnification Provisions It is standard practice in the USA to use indem- nification clauses as a tool for risk allocation. An indemnification clause is a contractual tool that allows parties to agree in advance as to who will bear the liability associated with spe- cific risks related to the contract (eg, breaches of representations and warranties in a purchase agreement). The indemnifying party (usually the seller) will typically seek to limit their exposure to the
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