What Should Your M&A Attorney be Telling You?
January 22, 2014
Los Angeles, California
Sponsored by Sheppard Mullin
Moderator: Will Chuchawat
Panelists: Tammy Brandt
Matthew Neco
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2014 ACC-SoCal In-House Counsel Conference
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Discussion Topics
What Does “Market” Really Mean?
What’s My Exposure?
Let’s Make a Deal
What Non-Legal Issues Should Your Counsel
Raise?
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What Should Your M&A Attorney
be Telling You?
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Panelists
Will Chuchawat
– Partner, Sheppard Mullin
– [email protected]
Tammy Brandt
– General Counsel, Service Mesh
– [email protected]
Matt Neco
– General Counsel, Docstoc, Inc.
– [email protected]
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Sheppard Mullin at a Glance
Fast Facts
 AmLaw 100 firm founded in Los Angeles in 1927
 625 attorneys practicing in 15 offices worldwide
 Represent most of the Fortune 100
 Firm’s attorneys ranked in Chambers USA, Legal 500, Best
Lawyers in America, Which Lawyer PLC, Super Lawyers, etc.
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What Does Market Really Mean?
The Studies
– ABA
– Houlihan
– SRS
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What Does Market Really Mean?
Be wary with those statistics and those that spout
them
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What Does Market Really Mean?
A deal looks different if your company looks like
this…
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What Does Market Really Mean?
versus this
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What Does Market Really Mean?
A $500 million deal is different than a $50 million
deal
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What Does Market Really Mean?
Private equity buyers and strategic buyers are two
different animals
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What Does Market Really Mean?
Asset deals vs stock deals vs mergers vs recaps
vs minority deals vs healthy deals vs distressed
deals vs technology deals vs A&D deals vs
healthcare deals vs …
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What’s My Exposure?
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What’s My Exposure?
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What’s My Exposure?
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What’s My Exposure?
How much exposure for the Seller?
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Reps and warranties
Covenants
Retained liabilities
Caps
Baskets
Survival
Third party recovery
Net of taxes
Mitigation
Require maintenance of insurance
Release
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What’s My Exposure?
How much exposure (coverage) for the Buyer?
– Due diligence
– Your watch, our watch
– Reps and warranties
 Sandbagging
– Covenants
– Assumed liabilities
– Consequential, loss of profit/revenue, multiplier
damages
– Legal opinion
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What’s My Exposure?
Buyer coverage/exposure continued
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Non-compete/Non-solicit/Non-disparagement
A/R
Inventory
Fraud
FCPA
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What’s My Exposure?
 Do I have to close?
 arrangement of satisfactory financing
 retention
 compliance with bulk sales laws
 receipt of favorable tax rulings
 confirmation of outstanding equity securities
 receipt of fairness opinions from investment bankers
 title policies for significant real estate
 an environmental audit
 certain regulatory actions
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Let’s Make a Deal
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Let’s Make a Deal
Flying Solo
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Let’s Make a Deal
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Let’s Make a Deal
When (why) do I call my lawyer?
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Let’s Make a Deal
When (why) do I call my lawyer?
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Planning
Deal team
Banker engagement letters
Exclusivity
Working Capital/Net Assets/Minimum Inventory/Cash
Escrow/Holdback
Promissory notes
Rollover
Earnout
338(h)(10)
Purchase Price Allocation
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Let’s Make a Deal
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Let’s Make a Deal
I’m not a banker, but you should talk to one.
Phase
Due Diligence
Preparation
Marketing / Solicitation
Negotiation
Closing
Conduct Due Diligence
Prepare Marketing Materials
Prepare Acquiror / Investor List
Contact Investors
Collect Confidentiality Agreements
Distribute Marketing Materials
Solicit Indications of Interest
Acquiror Due Diligence
Solicit and Receive Final Bids
Negotiate Purchase Agreement
Obtain Necessary Approvals
Sign and Close Transaction
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Let’s Make a Deal
I’m not an accountant, but you should talk to one.
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Let’s Make a Deal
What do I need to do to win the bid?
What do I need to do to close the deal?
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Let’s Make a Deal
What type of negotiator are you?
What type of negotiator is your lawyer?
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Let’s Make a Deal
What’s really a deal killer?
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What Non-Legal Issues Should My
Counsel Raise With Me?
Legal issues vs business issues
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What Non-Legal Issues Should My
Counsel Raise With Me?
What happens if XYZ happens?
– Loss of key customers
– Loss of key suppliers
– Loss of key employees (including the seller)
– Litigation
What happens if XYZ does not happen?
– Approval of the transaction
– Approval needed for the business
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What Non-Legal Issues Should My
Counsel Raise With Me?
Rep and warranty insurance
Insurance impact
Employment agreements/policies
Benefit plans
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What Non-Legal Issues Should My
Counsel Raise With Me?
IT
How does this effect your loan covenants?
SEC reporting requirements?
Third party shareholder representative
Escrow provider
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Take-Away Points
What’s market depends on the circumstances
It’s not rocket science, it’s a full contact sport
You don’t play contact sports alone
Call your lawyer early on
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11th Annual In-House Counsel Conference
January 29, 2014 (Los Angeles, CA)
www.acc.com/chapters/socal/
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