M&A Boot Camp booklet 2023 - Flipbook - Page 42
the acquirer is to issue a promissory note or stock as consideration in the
transaction
C.
Timing of the closing of the acquisition
1.
Deferred closing – In many cases, the closing of an acquisition (i.e., the
actual transfer of the target company’s stock or assets to the acquirer) does
not take place until several weeks or months after the signing of the
acquisition agreement. The parties use the period between signing and
closing to make required governmental filings and obtain needed
governmental approvals, to obtain needed contractual consents, to make
arrangements for any needed stockholder meeting, to obtain any needed
financing and to make preparations for the closing.
2.
Simultaneous signing and closing – Sometimes, the parties opt to have a
“simultaneous signing and closing” (i.e., to delay signing the acquisition
agreement until they are ready to close the acquisition). In this situation,
neither party is contractually committed (until the actual closing) to
proceed with the transaction, and either party accordingly may elect to
abandon the transaction for any reason prior to the closing. A number of
provisions may be eliminated from the acquisition agreement if there is a
“simultaneous signing and closing” – e.g., pre-closing covenants, closing
conditions and termination provisions.
D.
Pre-closing covenants of the target company – rules relating to the conduct of the
target company’s business between signing and closing
E.
Conditions to the acquirer’s obligation to consummate the acquisition (which, if
not satisfied, will give the acquirer a “walk right”)
1.
“Bring down” of representations and warranties regarding the target
company and its business – representations and warranties must be
accurate (at least in all material respects) on the closing date as if made on
the closing date
2.
Obtaining required contractual and governmental consents and approvals;
expiration of the waiting period under the Hart-Scott-Rodino Act;
obtaining “estoppel certificates” from parties to key contracts
3.
Litigation “out” – can be broad (e.g., giving the acquirer a “walk right” if
any litigation challenging the acquisition is commenced or threatened by
any governmental body or private party) or narrow
4.
Material adverse change “out”
5.
Continued availability of key employees of the target company; execution
by key employees of employment or consulting agreements and
noncompetition agreements
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