M&A Boot Camp booklet 2023 - Flipbook - Page 30
NEGOTIATING THE ACQUISITION OF
A PRIVATELY HELD BUSINESS: SOME
BASIC ISSUES AND PRINCIPLES
Richard E. Climan
Hogan Lovells US LLP
Silicon Valley, California
and
Joel I. Greenberg
Kaye Scholer LLP
New York, New York
and
Nathaniel L. Doliner
Carlton Fields
Tampa, Florida
I.
CHOOSING THE
ACQUISITION
A.
APPROPRIATE
LEGAL
STRUCTURE
FOR
THE
Stock Purchase – the acquirer purchases 100% of the target company’s
outstanding stock directly from the target company’s stockholders
1.
Requires unanimous “approval” of the target company’s stockholders; all
target company stockholders must sign the acquisition agreement
2.
The target company becomes a wholly-owned subsidiary of the acquirer
3.
Because the target company becomes a subsidiary of the acquirer, the
acquirer indirectly assumes responsibility for all of the target company’s
liabilities to third parties, including unknown liabilities
4.
There is no direct assignment of the target company’s contracts or
governmental permits; this may reduce the likelihood that third-party
consents will have to be obtained (although some contracts and permits
may require third-party consents with respect to a change of control of the
target company)
5.
For federal income tax purposes, the target company’s stockholders
generally have capital gains with respect to the sale of their stock; and,
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