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The International Comparative Legal Guide to: Mergers & Acquisitions 2019 13th Edition A practical cross-border insight into mergers and acquisitions

Published by Global Legal Group, with contributions from:

Aabø-Evensen & Co Advokatfirma Houthoff Schoenherr Advokatfirman Törngren Magnell Kelobang Godisang Attorneys SEUM Law Alexander & Partner Rechtsanwaelte mbB Kılınç Law & Consulting Shardul Amarchand Mangaldas & Co. Ashurst Hong Kong Law firm Vukić and Partners Skadden, Arps, Slate, Meagher & Flom LLP Atanaskovic Hartnell Loyens & Loeff and Affiliates Bär & Karrer Ltd. Maples Group Škubla & Partneri s. r. o. BBA Matheson SZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH Bech-Bruun MJM Limited Vieira de Almeida D. MOUKOURI AND PARTNERS Moravčević Vojnović and Partners Villey Girard Grolleaud Debarliev Dameski & Kelesoska in cooperation with Schoenherr Attorneys at Law Motta Fernandes Advogados Wachtell, Lipton, Rosen & Katz Dittmar & Indrenius Nader, Hayaux & Goebel Walalangi & Partners (in association with Nishimura & Asahi) E&G Economides LLC Nishimura & Asahi WBW Weremczuk Bobeł & Partners ENSafrica Nobles Attorneys at Law Ferraiuoli LLC NUNZIANTE MAGRONE WH Partners Gjika & Associates Oppenheim Law Firm White & Case LLP GSK Stockmann Popovici Niţu Stoica & Asociaţii Zhong Lun Law Firm HAVEL & PARTNERS s.r.o. Ramón y Cajal Abogados The International Comparative Legal Guide to: Mergers & Acquisitions 2019

General Chapters: 1 Global M&A Trends in 2019 – Scott Hopkins & Adam Howard, Skadden, Arps, Slate, Meagher & Flom (UK) LLP 1 2 The MAC is Back: Material Adverse Change Provisions After Akorn – Adam O. Emmerich & Trevor S. Norwitz, Wachtell, Lipton, Rosen & Katz 4 3 The Dutch ‘Stichting’ – A Useful Tool in International Takeover Defences – Alexander J. Kaarls & Contributing Editors Scott Hopkins and Lorenzo Willem J.T. Liedenbaum, Houthoff 10 Corte, Skadden, Arps, Slate, Meagher & Flom (UK) LLP Country Question and Answer Chapters:

Sales Director 4 Albania Gjika & Associates: Gjergji Gjika & Evis Jani 14 Florjan Osmani 5 Angola Vieira de Almeida: Vanusa Gomes & Paulo Trindade Costa 21 Account Director Oliver Smith 6 Australia Atanaskovic Hartnell: Jon Skene & Lawson Jepps 27 Sales Support Manager 7 Austria Schoenherr: Christian Herbst & Sascha Hödl 34 Toni Hayward 8 Belgium Loyens & Loeff: Wim Vande Velde & Mathias Hendrickx 45 Sub Editor 9 Bermuda MJM Limited: Jeremy Leese & Brian Holdipp 55 Jenna Feasey 10 Botswana Kelobang Godisang Attorneys: Seilaneng Godisang & Senior Editors Caroline Collingwood Laone Queen Moreki 62 Rachel Williams 11 Brazil Motta Fernandes Advogados: Cecilia Vidigal Monteiro de Barros 67

CEO 12 British Virgin Islands Maples Group: Richard May & Matthew Gilbert 75 Dror Levy 13 Bulgaria Schoenherr: Ilko Stoyanov & Katerina Kaloyanova 82 Group Consulting Editor 14 Cameroon D. MOUKOURI AND PARTNERS: Danielle Moukouri Djengue & Alan Falach Franklin Ngabe 91 Publisher 15 Cayman Islands Maples Group: Nick Evans & Suzanne Correy 96 Rory Smith 16 China Zhong Lun Law Firm: Lefan Gong 103 Published by Global Legal Group Ltd. 17 Croatia Law firm Vukić and Partners: Zoran Vukić & Ana Bukša 110 59 Tanner Street 18 Cyprus E&G Economides LLC: Marinella Kilikitas & George Economides 117 London SE1 3PL, UK Tel: +44 20 7367 0720 19 Czech Republic HAVEL & PARTNERS s.r.o.: Jaroslav Havel & Jan Koval 124 Fax: +44 20 7407 5255 Email: [email protected] 20 Denmark Bech-Bruun: Steen Jensen & David Moalem 131 URL: www.glgroup.co.uk 21 Finland Dittmar & Indrenius: Anders Carlberg & Jan Ollila 138 GLG Cover Design 22 France Villey Girard Grolleaud: Frédéric Grillier & Daniel Villey 146 F&F Studio Design 23 Germany SZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH: GLG Cover Image Source Dr. Marc Löbbe & Dr. Michaela Balke 153 iStockphoto 24 Hong Kong Ashurst Hong Kong: Joshua Cole & Chin Yeoh 161 Printed by Ashford Colour Press Ltd 25 Hungary Oppenheim Law Firm: József Bulcsú Fenyvesi & Mihály Barcza 168 March 2019 26 Iceland BBA: Baldvin Björn Haraldsson & Stefán Reykjalín 174 Copyright © 2019 27 India Shardul Amarchand Mangaldas & Co.: Iqbal Khan & Faraz Khan 181 Global Legal Group Ltd. All rights reserved 28 Indonesia Walalangi & Partners (in association with Nishimura & Asahi): No photocopying Luky I. Walalangi & Siti Kemala Nuraida 188

ISBN 978-1-912509-60-7 29 Ireland Matheson: Fergus A. Bolster & Brian McCloskey 193 ISSN 1752-3362 30 Italy NUNZIANTE MAGRONE: Fiorella Alvino & Fabio Liguori 202 Strategic Partners 31 Japan Nishimura & Asahi: Tomohiro Takagi & Kei Takeda 208 32 Korea SEUM Law: Steve Kim & Hyemi Kang 217 33 Luxembourg GSK Stockmann: Marcus Peter & Kate Yu Rao 225 34 Macedonia Debarliev Dameski & Kelesoska Attorneys at Law: Emilija Kelesoska Sholjakovska & Ljupco Cvetkovski 231 35 Malta WH Partners: James Scicluna & Rachel Vella Baldacchino 238 36 Mexico Nader, Hayaux & Goebel: Yves Hayaux-du-Tilly Laborde & Eduardo Villanueva Ortíz 245 37 Montenegro Moravčević Vojnović and Partners in cooperation with Schoenherr: Slaven Moravčević & Miloš Laković 252 Continued Overleaf

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

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Country Question and Answer Chapters: 38 Mozambique Vieira de Almeida: Guilherme Daniel & Paulo Trindade Costa 259 39 Netherlands Houthoff: Alexander J. Kaarls & Willem J.T. Liedenbaum 266 40 Norway Aabø-Evensen & Co Advokatfirma: Ole Kristian Aabø-Evensen & Gard A. Skogstrøm 275 41 Poland WBW Weremczuk Bobeł & Partners Attorneys at Law: Łukasz Bobeł 289 42 Portugal Vieira de Almeida: Jorge Bleck & António Vieira de Almeida 296 43 Puerto Rico Ferraiuoli LLC: Fernando J. Rovira-Rullán & María del Rosario Fernández-Ginorio 302 44 Romania Popovici Niţu Stoica & Asociaţii: Teodora Cazan 309 45 Saudi Arabia Alexander & Partner Rechtsanwaelte mbB: Dr. Nicolas Bremer 315 46 Serbia Moravčević Vojnović and Partners in cooperation with Schoenherr: Matija Vojnović & Vojimir Kurtić 322 47 Slovakia Škubla & Partneri s. r. o.: Martin Fábry & Marián Šulík 331 48 Slovenia Schoenherr: Vid Kobe & Bojan Brežan 337 49 South Africa ENSafrica: Professor Michael Katz & Matthew Morrison 348 50 Spain Ramón y Cajal Abogados: Andrés Mas Abad & Lucía García Clavería 357 51 Sweden Advokatfirman Törngren Magnell: Johan Wigh & Sebastian Hellesnes 364 52 Switzerland Bär & Karrer Ltd.: Dr. Mariel Hoch 370 53 Turkey Kılınç Law & Consulting: Levent Lezgin Kılınç & Seray Özsoy 378 54 Ukraine Nobles: Volodymyr Yakubovskyy & Tatiana Iurkovska 384 55 United Arab Emirates Alexander & Partner Rechtsanwaelte mbB: Dr. Nicolas Bremer 392 56 United Kingdom White & Case LLP: Philip Broke & Patrick Sarch 400 57 USA Skadden, Arps, Slate, Meagher & Flom LLP: Ann Beth Stebbins & Thomas H. Kennedy 408

EDITORIAL

Welcome to the thirteenth edition of The International Comparative Legal Guide to: Mergers & Acquisitions. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the laws and regulations of mergers and acquisitions. It is divided into two main sections: Three general chapters. These chapters are designed to provide readers with an overview of key issues affecting mergers and acquisitions, particularly from the perspective of a multi-jurisdictional transaction. Country question and answer chapters. These provide a broad overview of common issues in mergers and acquisitions in 54 jurisdictions. All chapters are written by leading mergers and acquisitions lawyers and industry specialists, and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editors Scott Hopkins and Lorenzo Corte of Skadden, Arps, Slate, Meagher & Flom (UK) LLP for their invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.com.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] Chapter 57 USA Ann Beth Stebbins

Skadden, Arps, Slate, Meagher & Flom LLP Thomas H. Kennedy

1 Relevant Authorities and Legislation a specified period of time, unless the shareholder has obtained approval from a supermajority (e.g., 66⅔%) of the shares held by the target company’s other shareholders or, prior to acquiring such 1.1 What regulates M&A? specified ownership threshold, target company board approval. Companies incorporated in the state may opt out of the protection of the state’s anti-takeover statutes in their certificate of incorporation. The United States has a federal system of government. Accordingly, Delaware has a business combination statute. regulation of M&A activity falls within the dual jurisdiction of the federal government and the individual state in which the target Finally, the exchange upon which the company’s securities are listed company is incorporated. Generally, the federal government may impose additional rules, in particular with respect to corporate regulates sales and transfers of securities through the Securities and governance matters and shareholder approval for certain actions. Exchange Commission (SEC), and polices competition matters through the Antitrust Division of the Department of Justice (DOJ) 1.2 Are there different rules for different types of and the Federal Trade Commission (FTC). Other federal agencies company? impose additional requirements over acquisitions in certain regulated industries. If the target company’s securities are registered under the Exchange Tender offers in the United States are subject to the federal rules and Act (regardless of whether the target company is incorporated in the regulations on tender offers and beneficial ownership reporting United States), the bidder must comply with the detailed disclosure under the Securities Exchange Act of 1934, as amended (Exchange requirements of the U.S. tender offer rules, and a number of Act). Acquisitions completed by means of a merger are governed by procedural requirements (including withdrawal rights for target the law of the state of incorporation of the target company. The company shareholders throughout the offer period, and certain solicitation of votes to approve a merger by the target company timing and offer extension requirements). If the target company’s shareholders must comply with federal rules and regulations on securities are not registered under the Exchange Act but the target proxy statements under the Exchange Act. If the bidder offers company has security holders in the United States, or if the target securities as consideration to the target company shareholders, the company is a foreign private issuer (i.e., its securities are registered registration requirements of the Securities Act of 1933, as amended under the Exchange Act) and U.S. security holders hold 10% or less (Securities Act), will also apply, unless an exemption from the of the class of securities sought in the offer, the bidder is not registration requirements is available. required to comply with the specific disclosure provisions of the The law of the state of incorporation of a company regulates the U.S. tender offer rules (if the target company is a foreign private internal affairs of a company, including the fiduciary duties owed by issuer and U.S. security holders hold between 10% and 40% of the the company’s board of directors to its shareholders in responding to class of securities sought in the offer, some of the provisions of the a takeover bid and the applicable statutory requirements for U.S. tender offer rules apply). Nevertheless, in any tender offer in approving and effecting merger transactions. The ability of a target which security holders in the United States may participate, the company to impose anti-takeover devices also will largely be bidder must comply with general anti-fraud and anti-manipulation determined by the law of its state of incorporation. rules that apply to all tender offers in the United States. These rules prohibit the use of materially misleading statements or omissions in Many states, including Delaware (where many of the largest the conduct of any offer, prohibit market purchases of the target corporations in the United States are incorporated), have anti- company’s securities “outside the offer”, and mandate a minimum takeover statutes. State anti-takeover statutes generally take one of offer period of at least 20 business days. two forms: control share acquisition statutes or business combination statutes. Control share acquisition statutes generally Regardless of whether the target company is incorporated in the provide that an acquiring shareholder is not permitted to vote target United States, if a bidder is offering securities as consideration in an company shares in excess of certain percentage ownership offer in the United States, the bidder must register the securities with thresholds, without first obtaining approval from the other the SEC, unless an exemption from registration is available. shareholders. Business combination statutes generally provide that Following the registration of securities in the United States, the after acquiring securities in the target company in excess of a registrant, its directors and its officers become subject to the specified threshold (e.g., 15%), a shareholder is barred from entering ongoing reporting and disclosure obligations established by the into business combination transactions with the target company for Exchange Act. The registrant, its directors and its officers will also

408 WWW.ICLG.COM ICLG TO: MERGERS & ACQUISITIONS 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London international norms. activities characterisedbytheU.S. governmentascontraryto and entitiesinconnectionwithRussian cyberoperationsandother announced additionalsanctionsin 2018againstseveralindividuals intelligence agencies. The U.S.Departmentsof Treasury andState Russia’s exportpipelinesandtransact withRussiandefenceand persons andentitiesthatundermineU.S.cybersecurity, investin approved additionalsanctionsagainstRussiain2017whichtarget technology andexpertiseintheenergy sector. The U.S.Congress gaining accesstoU.S.capitalanddebtmarkets,aswell sanctions thatlimitcertainsectorsoftheRussianeconomyfrom Since July2014,theU.S.governmenthasimposedsectoral air carrierswithU.S.domesticroutes;andnuclearenergy facilities. holding companies;primarydealersinU.S.governmentsecurities; restricting “alien”ownership;federalminingleases;banksorbank domestic tradeorcoastalshipping;broadcasting;andinstates may beprohibited. They include: maritimevesselsengagedin non-U.S. ownershiporcontrolwilltriggergovernmentalreviews In addition,therearespecificindustriesinwhichvariouslevelsof in theresponsestoquestions2.13and2.14. CFIUS reviewandinvestigationprocessisdescribedinmoredetail statutory pathwayforjudicialreviewofCFIUSdecisions. The certain foreigninvestments. The legislationalsoprovidesa procedural changes,includingmandatoryshortformfilingsfor issued interimregulationsthatimplementsomeofthelegislation's to timingandfilingfees. The U.S.Departmentof Treasury has legislation alsoincludescertainadministrativechangeswithrespect and codifiedcertainCFIUSregulationspractices. The transactions, mostnotablyovercertainnon-controlling expanded CFIUS'sjurisdictionoverpreviouslyuncovered Review Modernization Act of2018,enactedin August 2018, with potentialmilitaryapplications. The ForeignInvestmentRisk focus ondataprivacy, economicespionageandintellectualproperty information technologyandtelecommunications,withincreasing electronics manufacturing,scientificandtechnicalservices, defence, aerospace,utilities,transportation,computerand Industries viewedasparticularlysensitivebyCFIUSinclude 1.3 addition, anti-takeoverstatutesmayvaryfromstatetostate. largely bedeterminedbythelawofitsstateincorporation.In ability ofatarget companytoimposeanti-takeoverdeviceswill directors toitsshareholdersinrespondingatakeoverbidandthe question 1.1,thefiduciarydutiesowedbycompany’s boardof for effecting thesetransactions. As describedintheresponseto incorporation ofacompanyarethesourcestatutoryrequirements all oftheassetsacompany, asthelawsofstate transaction, oratransactioninvolvingthesaleofallsubstantially and boardapprovalsrequiredinconnectionwithamerger state ofincorporationacompanywillregulatetheshareholder on thestateofincorporationtarget company. The lawsofthe The rulesgoverningcertainM&A transactionswillvarydepending (Sarbanes-Oxley Act). and otherrequirementssetoutintheSarbanes-Oxley Act of2002 become subjecttotheongoingcorporategovernance,certification United States,theregistrant,itsdirectorsandofficers will SEC. Inaddition,followingregistrationofitssecuritiesinthe be liableformisstatementsandomissionsinreportsfiledwiththe Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 security arisingfromforeigninvestmentsinU.S.businesses. broad authoritytoidentifyandmitigaterisksU.S.national gives theCommitteeonForeignInvestmentinU.S.(CFIUS) Section 721oftheDefenseProduction Act of1950,asamended, Are therespecialrulesforforeignbuyers?

knowledge ofthematerialmisstatement oromission. may alsohaveliability, unlessthecontrollingpersondidnothave another personwithliabilityunder Section11 oftheSecurities Act misstatements oromissions. Additionally, anyonewhocontrols statement becameeffective, thattherewerenomaterial basis tobelieve,anddidbelieve atthetimeregistration prove theymadeareasonableinvestigationandhad Defendants otherthanthebiddermayavoidliabilityiftheycan omissions intheregistrationstatementregisteringsuchsecurities. the Securities Act formaterialfalseandmisleadingstatementsor officers anditsunderwriters, mayhaveliabilityunderSection11 of company, thebidder, aswellitsdirectors,principalexecutive If abidderoffers securities as considerationforsharesofthetarget rule isdiscussedinfurtherdetailtheresponsetoquestion2.5. than anyothershareholderintheoffer. The allholders/bestprice shareholders whowerepaidlessconsiderationfortheirsecurities holders/best price”rulemaysubjectthebiddertoliabilityall any holderofthesameclasssecurities. Violation ofthis“all class, andthepricepaidtoeachholdermustbebest must makeitsoffer availabletoallholdersofsecuritiesthesame consideration consists,inwholeorpart,ofsecurities),abidder In atenderoffer orexchangeoffer ( constituting theviolation. good faithanddidnotdirectlyorindirectlyinducetheact liability forviolationsoftheExchange Act, unlesstheyactedin response toquestion2.6).Controllingpersonsmayalsohave requirements fortheuseofaprospectusarediscussedin as tostatementsincludedinanyproxystatement/prospectus(the company’s shareholdersbeforetheymayvoteonamerger), aswell of adefinitiveproxystatement(whichmustbesenttotarget This appliestoanysolicitation,includingthosepriorthedelivery solicitation, whetheroralorwritten,maybefalsemisleading. tender offer. Ifthetransactionisstructuredasamerger, no deceptive ormanipulativeactspractices,inconnectionwithany prohibits materialmisstatementsandomissionsfraudulent, be applicabletothetransaction.)Section14(e)ofExchange Act or amerger. The structureofthetransaction( U.S. federalsecuritieslawsforthebidderoratarget inatenderoffer applicable toatransactionmaybesourceofliabilityunderthe Failure tocomplywiththedisclosureandproceduralrequirements 1.5 ownership inordertoprotecttheirtaxstatus. documents uniquerequirementswithrespecttochangesin Investment Trusts (REITs), oftenincludeintheirorganisational Additionally, certaintypesofentities,suchasRealEstate business combinations. ability ofanyacquirer, whetherU.S.orforeign,toengagein and thereforesubjecttoindustry-specificrulesthatregulatethe banking, media,transportationandmining,arehighlyregulated, Certain industries,suchaspublicutilities,insurance,gaming, 1.4 (each, a“goingprivate”transaction),additiona group whichincludesmembersofthecompany’s seniormanagement then wishestotakethatcompanyprivate,orifthebidderisabuyout transaction. (Ifabidderownssignificantstakeincompanyand particular disclosureandproceduralrulesapplicabletothe involvement oftarget companyinsiderswilldeterminethe exchange offer ormerger), theformofconsiderationand What aretheprincipalsourcesofliability? Are thereanyspecialsector-relatedrules? i.e., atenderoffer inwhichthe WWW.ICLG.COM l disclosureruleswill i.e., tenderoffer, USA

409 USA 410 USA company isincorporated,orsuchlatertimeasspecifiedtherein. with thesecretaryofstateinwhichsurviving becomes effective atsuchtime asa“certificateofmerger” isfiled wholly ownedsubsidiaryoftheacquiringcompany. The merger company ortheacquisitionsubsidiarywillsurvivemerger asa merged withthenewacquisitionsubsidiary, andeitherthetarget acquisition subsidiarytoeffect themerger. The target companyis In atypicalmerger transaction,theacquiringcompanyformsanew statutory merger, tenderoffer andexchangeoffer. The mostcommonmethodsforacquiringaU.S.publiccompanyare 2.1 $40,000 perday. the Hart-Scott-Rodino Act mayresultinamonetarypenaltyof more detailintheresponsetoquestion2.14.Failurecomplywith securities orassetsinexcessofcertainthresholds,asdescribed and waitingperiodsinconnectionwiththeacquisitionofvoting related rules(Hart-Scott-Rodino Act) imposesnoticerequirements The Hart-Scott-Rodino Antitrust Improvements Act of1976and employed. private transactionswherecertainproceduralsafeguardsare 3.3, the“deferentialbusinessjudgment”ruleisapplicableingoing shareholders. As discussedmorefullyintheresponsetoquestion both thepriceandprocessbefairtotarget company reviewed usingan“entirefairness”standard,whichrequiresthat states, includingDelaware,theconductoftarget boardmaybe was reasonable.Iftheoffer isagoingprivatetransaction,inmany change ofcontroltransactiontodetermineiftheboard’s conduct will besubjecttoanenhancedlevelofscrutinybythecourtsina responses toquestions3.3and8.2,theconductoftarget board their fiduciarydutiesinrespondingtoanoffer. As discussedinthe target companyshareholdersifthedirectorsfailtoproperlyexercise Members ofthetarget companyboardmayhaveliabilitytothe remains ineffect. garnered therequisitesupportinCongress,andDodd-Frank Act the provisionsofDodd-Frank Act, suchefforts havenot Congress madeseveralefforts in2017and2018torollbacksomeof combination ofthetwo. Although the Trump administrationand conduct intheU.S.oreffect ontheU.S.securitiesmarkets,orsome of thefederalsecuritieslawssolongasthereexistssignificant extraterritorial reachoftheSECtoenforceantifraudprovisions system. Among otherthings,theDodd-Frank Act codifiedthe crisis, wasintendedtodecreasetherisksinU.S.financial (Dodd-Frank Act), enactedin2010asaresponsetothefinancial The Dodd-Frank Wall StreetReformandConsumerProtection Act Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM of thetarget companywithouttarget company boardapprovalora be consummatedbyanacquirerthat ownsatleast90%oftheshares laws ofmanystates,includingDelaware, a“short-formmerger” can shareholders oftheconstituentcompanies. However, underthe boards ofdirectorstheconstituent companiesandavoteofthe foregoing. Merger transactionstypicallyrequireapprovalof the securities, rights,otherproperty, oracombinationofanythe merger considerationmay be comprisedofcash,equityordebt appraisal rights,asdescribedintheresponsetoquestion2.5). The right toreceivethemerger consideration (subjecttoanystatelaw shareholders, andthetarget company shareswillrepresentonlythe cancelled withnoactionrequiredonthepartoftarget company owned bythetarget company shareholdersareautomatically Upon effectiveness ofthemerger, allsharesofthetarget company 2 Mechanics of Acquisition What alternativemeansofacquisitionarethere?

appropriate oversight overadvisersduringasaleprocess. and mitigatesanypotentialadviser conflicts,andprovides target boardshouldtakestepstodesignasaleprocessthatidentifies scrutiny ofadviserconductandconflicts inM&A transactions,the part ofthebuyer’s financinggroup.Giventhistrendofgreater court disclose conflictsarisingfromthe financialadviser’s attempt to be violation offiduciarydutiesby, amongotherthings,failingto that asell-sidefinancialadviseraidedandabettedthetarget board’s Delaware SupremeCourtupheldtheofChancery’s finding acquirer thatwerenotdisclosedtoitsclient.Inonenotablecase,the interest arisingoutofrelationshipswithboththetarget andthe situations whereafinancialadvisermayhaveperceivedconflictsof investment bankingadvisersinM&A transactions,particularlyin In recentyears,theDelawarecourtshavefocusedonconductof regulatory matters. required, inparticularconnectionwithantitrustandother company andthetarget company willalsoprovideexpertadviceas also beengagedbytheparties.Legaladviserstoacquiring consultants, employeebenefitconsultantsandotherspecialistsmay shareholders). As requiredbythesituation,environmental all oraportionoftheconsiderationtotarget company’s customary whentheacquiringcompanyisoffering itssecuritiesas review bythetarget oftheacquiringcompany’s businessis due diligencereviewoftheotherparty’s business(aduediligence The partiesmayalsoengageaccountingfirmstoassisttheminthe with theacquiringcompany’s legaladvisers. drafting andnegotiatingthetransactiondocumentation,together responding totheoffer, andthelegaladviserswillparticipatein legal advisersastoitsfiduciarydutieswithrespectreviewingand of theacquirer. The target companyboardwilltakeadvicefromits of atarget companywhosesizeissignificantinrelationtothe request afairnessopinionfromitsfinancialadviserinanacquisition for thispurpose. The boardoftheacquiringcompanymayalso from itsfinancialadviser, andmayretainasecondfinancialadviser The target companyboardgenerallyrequestsa“fairnessopinion” received andassessingtheirfairness,fromafinancialpointofview. company boardinidentifyingpotentialbidders,reviewinganybids The financialadvisertothetarget companyassiststhetarget necessary documentation. structuring itsoffer, aswelldraftingandnegotiatingthe acquiring companywillalsoassistthein target companyandstructuringitsoffer. Legaladviserstothe acquiring companyassiststheinvaluing retain legalandfinancialadvisers. The financialadvisertothe The partiesinapubliccompanyacquisitiontransactiongenerally 2.2 appraisal rights,asdescribedintheresponsetoquestion2.5). entitled toreceivethemerger consideration(subjecttoanystatelaw shareholders whodidnottendertheirsharesintotheoffer areonly target companysharesarecancelled,andtarget company merged withasubsidiaryoftheacquiringcompany, anyremaining discussed above),inwhichthetarget companyinthetransactionis followed byaback-endmerger (whichmaybeshort-form,as company shareholders. A tenderoffer oranexchangeoffer isoften purchases stockofthetarget companydirectlyfromthetarget In atenderoffer oranexchangeoffer, theacquiringcompany shares) followingthecompletionofatenderoffer. shares toapprovethemerger (typicallyamajorityoftheoutstanding “short-form merger” iftheacquirerownsasufficient numberof 7.4, Delawarealsopermits,incertaincircumstances,theuseofa separate shareholdervote. As describedintheresponsetoquestion What advisersdothepartiesneed? ICLG TO: MERGERS &ACQUISITIONS 2019 USA

Skadden, Arps, Slate, Meagher & Flom LLP USA

Although in most instances SEC rules permit the bidder to 2.3 How long does it take? commence the offer before the registration statement is declared effective, in practice this is often not done because the bidder may The typical timeline for a transaction varies depending on the be forced to recirculate its exchange offer documents if the SEC has structure of the transaction, the form of consideration, the material comments to the registration statement. The exchange conditions to be satisfied and whether the transaction is friendly or offer must remain open for at least 20 business days once hostile. The timelines set forth below may be extended if the commenced; however, the offer period is generally longer in an transaction is subject to regulatory approval, including review by exchange offer because it may not be completed until the SEC has CFIUS over transactions that could result in foreign control of a declared the registration statement effective. The SEC review and

U.S. business, or any extension of the waiting period under the Hart- comment process may take as long as approximately six to eight USA Scott-Rodino Act, each as described in the response to question weeks. 2.14. In addition, a bidder should assume a longer timeline if the The timeline may be further extended if the securities to be offered offer is hostile and, as a result, the target company seeks to take in the exchange offer represent 20% or more of the bidder’s issued advantage of available takeover defences. and outstanding share capital, in which case the bidder will be Cash tender offer: In general, a cash tender offer has the shortest required to obtain shareholder approval for the issuance of shares timeline, and can be effected 20 business days from the date offering from the bidder’s shareholders if the bidder is a domestic company materials are first disseminated to the target company shareholders, listed on an exchange with such an approval requirement. (This will assuming there are no conditions that would take more than 20 be the case if the bidder is a domestic company with securities listed business days to satisfy. If there is a change in price or in the on the New York Stock Exchange or NASDAQ. The other principal percentage of securities being sought in the offer, the offer must be U.S. securities exchanges generally have shareholder approval rules kept open for at least 10 additional business days from the date of similar to that of the NYSE and NASDAQ.) A bidder would also be the change. Certain other material changes, including the waiver of required to seek approval from its shareholders if it does not have a condition or the satisfaction of a funding or financing condition, sufficient authorised share capital to complete a transaction and as a require the offer to be kept open at least five business days after the result an amendment to its charter is required. Set forth below is an change is made. The target company must file with the SEC a indicative timeline for a friendly exchange offer, assuming issuance recommendation statement on Schedule 14D-9 (the requirements of of shares by a domestic NYSE or NASDAQ listed bidder which are described in the response to question 3.3) within 10 representing more than 20% of the bidder’s outstanding shares: business days from the commencement of the offer. Set forth below is an indicative timeline for a friendly cash tender offer: Date Exchange Offer

Weeks 1–2 Exchange information with target. Date Cash Tender Offer Due diligence review by target and bidder. Weeks 1–2 Receive information from target. Valuation analysis by financial advisers. Due diligence review by bidder. Draft merger agreement providing for exchange offer. Valuation analysis by financial advisers. Draft merger agreement providing for tender offer. Week 3 Negotiate merger agreement providing for exchange Negotiate merger agreement providing for tender offer. offer. Week 4 Boards approve merger agreement. Week 3 Boards approve merger agreement. Merger agreement executed. Merger agreement executed. Transaction announced. Transaction announced. Weeks 5–7 Bidder drafts and files tender offer statement on Draft exchange offer documents (including Schedule TO. registration statement) and proxy statement to be sent Mail offer documents to shareholders of target to bidder’s shareholders to solicit their approval for

company. issuance of the bidder’s shares. 20-business-day offer period commences. Week 8 File exchange offer documents and proxy statement Target company drafts and files recommendation with the SEC (review period commences; typically 30 statement on Schedule 14D-9. days).

Week 7 Offer period expires. Weeks 13– SEC comments received on exchange offer documents

Bidder promptly pays for target company shares 15 and proxy statement. tendered. Respond to SEC comments. If bidder owns a sufficient number of the target company’s voting securities (and is otherwise eligible Week 16 SEC declares effective registration statement included to use a short-form merger), bidder files merger in exchange offer documents and clears proxy certificate; if not, target company calls shareholder statement.

meeting to approve the merger (see merger timeline Bidder files tender offer statement on Schedule TO. and response to question 7.4 below). Mail exchange offer documents (including prospectus forming part of the registration statement) and proxy statement to shareholders of target company and Exchange offer: Any time securities are offered as consideration in bidder. an exchange offer, the acquiring company must register the 20-business-day offer period commences. securities under the Securities Act (unless an exemption from Target company files recommendation statement on Schedule 14D-9. registration is available) and the timeline will likely be extended. The registration statement must be filed with the SEC along with the required exchange offer documents, and must be declared effective by the SEC before the bidder can acquire shares in the offer. The portion of the registration statement that is sent to target company shareholders is called the prospectus.

ICLG TO: MERGERS & ACQUISITIONS 2019 WWW.ICLG.COM 411 © Published and reproduced with kind permission by Global Legal Group Ltd, London Skadden, Arps, Slate, Meagher & Flom LLP USA

Week 20 Meeting of bidder shareholders to approve issuance of Set forth below is an indicative timeline for a merger in which all of shares to target company shareholders. the consideration offered is cash: Offer period expires. Bidder promptly pays for target company shares Date Merger – cash consideration

tendered. (assuming SEC review of proxy statement) If bidder owns a sufficient number of the target company’s voting securities (and is not otherwise Weeks 1–2 Due diligence review by bidder.

ineligible to use a short-form merger), bidder files Valuation analysis by financial advisers. merger certificate; if not, target company calls Draft merger agreement. shareholder meeting to approve the merger (see USA Week 3 Negotiate merger agreement. merger timeline and response to question 7.4 below). Week 4 Boards approve merger agreement. Merger: Because a merger requires the approval of the target Merger agreement executed. company shareholders, a meeting of the target company shareholders Transaction announced. must be convened to vote on the merger and proxy materials must be Weeks 5–7 Draft proxy statement. disseminated to the target company shareholders in advance of the Week 8 File proxy statement with the SEC. meeting. The proxy materials must be filed with, and cleared by, the SEC before the target company uses the proxy materials to solicit Weeks SEC comments received on proxy statement. the votes of its shareholders. In recent years, the SEC has declined 13–14 Respond to SEC comments. to comment on most proxy statements for cash mergers, thereby Week 15 SEC clears proxy statement. shortening the timeline for an all-cash merger by two to four weeks. Proxy statement mailed to target company shareholders. If the target company shareholders are to receive securities of the acquiring company as consideration in the merger, such securities Week 19 Meeting of target shareholders. must be registered by means of the filing of a registration statement Closing (assuming no other conditions to be satisfied). with the SEC, as described above. Also, as described above, if the Merger effective when merger certificate is filed with securities to be issued by the acquiring company as consideration in Secretary of State (or such later date specified therein).

the merger represent 20% or more of the acquiring company’s issued and outstanding share capital and the acquiring company is a domestic company listed on an exchange with an approval 2.4 What are the main hurdles? requirement, the acquiring company will be required to obtain shareholder approval for the issuance of shares. Set forth below is Cash tender offer: Once an offer is commenced, the main hurdle to an indicative timeline for a merger in which all or part of the completion is the satisfaction (or, to the extent legally permissible, consideration offered is securities in the acquiring company: waiver) of any conditions, including any minimum tender condition, regulatory conditions and expiration of the Hart-Scott-Rodino Act Date Merger – stock consideration waiting period, if applicable. Weeks 1–2 Exchange information with target. Exchange offer: The SEC must declare effective the registration Due diligence review. statement for the securities to be offered as consideration in the

Valuation analysis by financial advisers. offer. Once the offer is commenced, all conditions to the offer, Draft merger agreement. including the minimum tender condition, any regulatory conditions Week 3 Negotiate merger agreement. and expiration of the Hart-Scott-Rodino Act waiting period, if applicable, must be satisfied (or, to the extent legally permissible, Week 4 Boards approve merger agreement. waived). If the securities to be issued in the exchange offer Merger agreement executed. Transaction announced. represent 20% or more of the bidder’s issued and outstanding share capital and the acquiring company is a domestic company listed on Weeks 5–7 Draft proxy statement/registration statement (including prospectus). an exchange with an approval requirement, the bidder’s shareholders will be required to approve the issuance of the new Week 8 File proxy statement/registration statement (including shares before the offer can be consummated. prospectus) with the SEC (review period commences; typically 30 days). Merger: The SEC must clear the proxy materials to be disseminated to the shareholders of the target company. If the consideration Weeks 13– SEC comments received on proxy

15 statement/registration statement (including includes securities of the acquiring company, the SEC must declare prospectus). effective the registration statement relating to such securities. (In practice, the proxy statement and prospectus are combined into a Respond to SEC comments. single document, which is reviewed by the SEC.) Shareholders of Week 16 SEC declares effective registration statement. Proxy statement/prospectus mailed to shareholders of the target company must approve the merger. If the acquiring target company and acquiring company. company is issuing new shares representing 20% or more of its share capital and the acquiring company is a domestic company Week 20 Meetings of target shareholders and acquiring listed on an exchange with an approval requirement, the acquiring company shareholders. Closing (assuming no other conditions to be satisfied). company shareholders will be required to also approve the Merger effective when merger certificate is filed with transaction. Antitrust and other regulatory approvals may be Secretary of State (or such later date specified conditions to the closing of the merger. therein).

412 WWW.ICLG.COM ICLG TO: MERGERS & ACQUISITIONS 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London process andnostructuralimpediments, thedealpriceshouldbe Supreme Courtdeterminedthatin situationswitharobustsales value. Inarecentdecisionaddressing thequestion,Delaware have consideredwhetherthedealprice isareliableindicatoroffair such amount.Inseveralrecentappraisal cases,theDelawarecourts appraisal amountsoastoreduce the statutoryinterestpayableon appraisal claim,however, acquirersmaychoosetoprepaythe of whetherthedissentingshareholderultimatelyprevailsonits accrues ontheentireamountofmerger consideration,regardless appraisal areentitledtoreceiveinterestatastatutoryratethat publicly tradedsecurities.Dissentingshareholderswhoseek consideration receivedbythetarget companyshareholdersis securities priortotheconsummationofmerger, evenifthe acquirer ownslessthan90%ofthetarget company’s voting acquirer effects ashort-form merger followingatenderoffer andthe also availabletoshareholdersofaDelawaretarget companyifthe cash andsecuritiesasmerger consideration. Appraisal rightsare target companyshareholders receiveallcashoracombinationof more than2,000shareholders. Appraisal isgenerallyavailableifthe are eitherlistedonanationalsecuritiesexchangeorheldby consideration fortheirtarget companyshares,andsuchsecurities target companyshareholdersreceiveonlysecuritiesas consideration). InDelaware,appraisalrightsarenotavailableif value oftheirshares(whichmaybemoreorlessthanthemerger seek appraisal,inwhichcasetheywillbeentitledtotheappraised merger andfollowspecifiedstatutoryproceduresmaybeentitledto states, target companyshareholderswhodonotvotetoapprovethe subject totheapprovaloftarget companyshareholders.Inmany acquiring companyandthetarget company, andthemerger is Merger company shareholdersona oversubscribed, thebiddermustpurchasesecuritiesfromtarget for fewerthanallofthesecuritiesclassandoffer is any securitiestenderedduringtheoffer period.Iftheoffer ismade Shareholders ofthetarget companymustbepermittedtowithdraw exchange offer mustremainopenforatleast20businessdays. As describedintheresponsetoquestion2.3,atenderoffer or the commencementofoffer. be atleastashighthepricepaidbybidderforsharespriorto United Statesthattheoffer priceinatenderoffer orexchange offer Unlike certainotherjurisdictions,thereisnorequirementinthe consideration paidfortenderedsecurities. company, theywillconclusivelybedeemedtonotconstitute directors oftheboardeitherbidderortarget compensation committeeoranotherofindependent company. Ifsuchcompensatoryarrangementsareapprovedbythe company’s shareholderswhoarealsoemployeesofthetarget or otheremployeebenefitarrangementsenteredintowiththetarget offer, anddoesnotapplytoemploymentcompensation,severance for tenderedsecuritiesinconnectionwithatenderorexchange The allholders/bestpriceruleappliesonlytotheconsiderationpaid securities beforeoraftertheconsiderationwasincreased. all tenderingshareholders,regardlessofwhethertheytenderedtheir during theoffer period,theincreasedconsiderationmustbepaidto all holders.Iftheacquiringcompanyincreasesconsideration highest considerationpaidtooneholderintheoffer mustbepaidto holders oftheclasssecuritiesforwhichoffer ismade,andthe (Rule 14d-10undertheExchange Act), anoffer mustbeopentoall Tender/exchange offe 2.5 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 price? How muchflexibilityisthereoverdealtermsand : Inamerger, thetermsandpricearenegotiatedbetween r : Underthe“allholders/bestprice”rule pro ratabasis.

circumstances describedabove. consists ofallcashoramixandsecurities,underthe target companycanbringappraisalclaimsiftheconsideration As notedintheresponsetoquestion2.5,shareholdersofaDelaware to question2.3. merger andinatender/exchangeoffer arediscussedinthe response The timingdifferences betweenoffering cashandsecurities ina necessary. accordance withU.S.GAAP, areconciliationtoU.S.GAAP willbe acquiring company’s financialstatementsarenotpreparedin accounting principles(GAAP)willberequired.Otherwise,ifthe (IASB), thennoreconciliationtoU.S.generallyaccepted (IFRS) issuedbytheInternational Accounting StandardsBoard accordance withInternationalFinancialReportingStandards a foreignprivateissueranditsfinancialstatementsarepreparedin statement certainfinancialinformation.Iftheacquiringcompanyis acquiring companywillberequiredtoincludeinitsregistration includes securitiesoftheacquiringcompany. Forexample,the be disclosedtothetarget companyshareholdersiftheconsideration More informationabouttheacquiringcompanywillberequiredto and disclosurerequirementsundertheSarbanes-Oxley Act. other ongoingcorporategovernance,certification,internalcontrols periodic reportingrequirementsoftheExchange Act andcertain securities withtheSEC,anon-U.S.bidderbecomessubjectto distributed tothetarget companyshareholders.Byregistering declared effective beforetheproxystatement/prospectusis (including aprospectus)thatmustbefiledwiththeSECand solicitation materialswillbecombinedwitharegistrationstatement acquire thesharesinoffer. Inthecaseofamerger, theproxy and mustbedeclaredeffective bytheSECbeforebiddercan with theSECalongrequiredexchangeoffer documents, case ofanexchangeoffer, theregistrationstatementmustbefiled company mustregisterthesecuritiesunderSecurities Act. Inthe exchange offer orinamerger, absentanexemption,theacquiring Any timesecuritiesareoffered aspartoftheconsiderationinan 2.6 2.7 than dealprice. process isflawed,thecourtmaygivemoreweighttofactorsother afforded “heavyweight”asaproxyforfairness. Where thesale merger. Suchdisparatetreatmentcommonlyoccursinagoing shareholders totreattheirshares differently andoutsideof the equally, although theacquirermayagreeseparatelywithcertain merger, all sharesofthesameclassstockaregenerallytreated the offer otherwisethanpursuanttothetenderoffer. Inastatutory make arrangementstopurchase,the securitiesthatarethesubjectof the bidderisnotpermittedtopurchase,directlyorindirectly, or by abidderoftenderoffer untiltheexpirationoftenderoffer, from allsecurityholderswhotender. Followingtheannouncement subscribed, thebiddermustpurchasesharesona than 100%ofthesecuritiesaclassandtenderoffer isover- all target companyshareholders. When thetenderoffer isforfewer consideration paidtooneholderinthetenderoffer mustbepaidto holders ofsecuritiesthesameclass,andhighest holders/best pricerule,atenderoffer mustbeextendedtoall As describedintheresponsetoquestion2.5,underall other consideration? shareholders? What differencesaretherebetweenofferingcashand Do thesametermshavetobeofferedall WWW.ICLG.COM pro ratabasis USA

413 USA 414 USA merger orrecommending anoffer. the interestsoftarget companyemployeeswhenapproving a statutes thatpermitorrequirethetarget companyboardtoconsider However, certainstates(notincludingDelaware)have constituency taxable totheshareholder. company’s newowners. This typeof“rollover”isgenerallynot shareholders) andthereafterpurchasingsharesfromthetarget shares convertedintocash(likeheldbyothertarget company an equityinterestinthetarget company, ratherthanhavingtheir the target companywithrespecttoapotentialoffer ormerger. company ortheacquiring consultwiththeemployeesof In general,thereisnorequirementintheUnitedStatesthattarget 2.10 proxy statementorrecommendationonSchedule14D-9. merger oracquisitionmustbedisclosedinthetarget company’s Compensation arrangementsenteredintoinconnectionwitha effective uponclosingoftheacquisition. compensation arrangementswithkeyemployeesthatbecome acquisition. The acquiringcompanymayalsoenterintonew payable tosuchemployeesfollowingthecompletionof company mayagreetotransactionorretentionbonusesthatbecome increase thelikelihoodofkeyemployeesstayingon,acquiring company employeesdecidetoremainwiththecompany. To The successofanacquisitionoftendependsonwhetherthetarget 2.9 offer. holders ofaclasssecuritiesotherthanthesubjectto There isnostatutoryrequirementthatanoffer beextendedto 2.8 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM private transaction,inwhich will notbedeemedtoconsiderationpaidinthetenderoffer. arrangements and,asaresult,thatsuchcompensation holders/best pricerulewillapplytosuchcompensatory company inordertoensurethatthesafeharbourprovisionsall directors oftheboardeitherbidderortarget compensation committeeoranotherofindependent tender offer, compensatoryarrangementsshouldbeapprovedbythe As discussedintheresponsetoquestion2.5,contextofa the transaction. or thetarget companyboardinitsapprovalandrecommendationof the target companymanagementinitsnegotiationofthetransaction, respect topotentialconflictsofinterestthatcouldhaveinfluenced target companyshareholderswithallmaterialinformation or recommendationstatementonSchedule14D-9mustprovide “say-on-golden parachute”vote).Inaddition,theproxystatement binding advisoryvoteofthetarget company’s shareholders( arrangements thatithaswithitsseniormanagementtoanon- similar transactionisrequiredtosubmitanysuchcompensation target companysolicitingproxiesinconnectionwithamerger or management ofeachcompanyontheotherhand.Moreover, a between thetarget oracquirer, ontheonehand,andsenior provide detaileddisclosureof“goldenparachute”arrangements Public companiessubjecttothefederalproxyrulesarerequired employees? target securities? stakeholders play? What roledoemployees,pensiontrusteeandother Are thereanylimitsonagreeingtermswith Are thereobligationstopurchaseotherclassesof membersofmanagementmayretain

i.e., a

Tender offer U.S. federalsecuritieslaws. company, issubjecttothereportingandliabilityprovisionsof takes comfortfromthefactthattarget company, asapublic representations andwarranties. The acquiringcompanygenerally the acquiringcompanyisnotindemnifiedforanybreachesofsuch representations andwarrantiestypicallydonotsurviveclosing, materiality and“materialadversechange”qualifiers. The such representationsandwarrantiestypicallyaresubjecttobroad targets generallycontainfewrepresentationsandwarranties, conditions oftheoffer). Agreements toacquirepubliccompany acquisition priortothemerger, willsetforththetermsand tender orexchangeoffer istobemadeasthe“firststep”of the target companywillenterintoamerger agreement(which,ifa company, anacquisitionsubsidiaryoftheacquiringcompanyand In friendlytender/exchangeoffers andmergers, theacquiring 2.11 ■ ■ ■ ■ TO) mustinclude: Tender offer: The contentsofthetender offer statement(Schedule 2.12 incorporation inwhichthesurvivingcorporationisincorporated. certificate ofmerger isfiled with thesecretaryofstatein Assuming shareholdersofthetarget companyapprovethemerger, a acquiring companyaredescribedintheresponsetoquestion2.12. statement wheretheconsiderationincludessecuritiesof company isaforeignprivateissuer). The contentsofaproxy registration statementonFormS-4(FormF-4iftheacquiring the acquiringcompanymustalsoprepareandfilewithSECa If theconsiderationincludessecuritiesofacquiringcompany, proxy statementaredescribedinresponsetoquestion2.12. merger bythetarget company’s shareholders. The contentsofthe is thedocumentthatwillbeusedtosolicitapprovalof company andthetarget companywilldraftaproxystatement,which Merger securities asconsideration. The registrationstatement(which of theSecurities Act willapplybecausethebidderisoffering 2.12. of theregistrationstatementaredescribedinresponsetoquestion before thebiddercanacquireanysharesinoffer. The contents into asingledocument)andmustbedeclaredeffective bytheSEC with theexchangeoffer documentonSchedule TO (inpractice, bidder isaforeignprivateissuer)mustbefiledwiththeSECalong includes thebidder’s prospectus)onFormS-4(FormF-4ifthe the bidder’s prospectusandexchangeoffer documentar Exchange offe in responsetoquestion2.12. document. The contentsofthetenderoffer statementaredescribed statement (Schedule TO) withtheSEC,whichwillincludeoffer

terms oftheoffer; the bidder’s identityandbackground; price forthelasttwoyears; traded andinformationaboutthe target company’s share the principalmarketwheretarget companysecuritiesare of sharesoutstandingtheclass of securitiesbeingsought, name, addressandtelephonenumber, titleandtotalnumber basic informationaboutthetarget company, includingits format ofthemostmaterialtermsoffer; a summarytermsheet,withbriefdescriptioninbulletpoint What documentationisneeded? Are thereanyspecialdisclosurerequirements? : After amerger agreementisexecuted,theacquiring ICLG TO: MERGERS &ACQUISITIONS 2019 : Inatenderoffer, thebidderwillfileatenderoffer r : Inanexchangeoffer, theregistrationrequirements e combined USA

■ ■ ■ ■ ■ ■ ■ statement onSchedule TO: addition totheitemssetforthaboveforinclusionintenderoffer reference tothebidder’s ortarget’s SECfilings,ifapplicable),in the followinginformation(someofwhichmaybeincorporatedby if theacquiringcompanyisaforeignprivateissuer)mustinclude Exchange offe ■ ■ ■ ■ ■ ■ ■ Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 registration statement; the prospectus/exchangeoffer documentincludedinthe the announcementofoffer andpriortotheprintingdateof prices ofthebidder’s andthetarget company’s sharespriorto for thebidderandtarget company; required); historical financialstatementsofthebidderwillalsobe financial informationisrequiredtobeincluded,then the target companyissignificanttothebidder(if target companysecuritiesareacquiredandtheacquisitionof subsequent merger orothertransactioninwhichremaining tender offer statementswhensecuritiesaretobeoffered ina pro formafinancialinformation;thisisrequiredonlyincash reconciliation toU.S.GAAP willbenecessary); statements arenotpreparedinaccordancewithU.S.GAAP, a GAAP willberequired;otherwise,ifthebidder’s financial accordance withIASBIFRS,thennoreconciliationtoU.S. private issuerwithfinancialstatementspreparedin financial informationisrequiredandthebidderaforeign subject class (iii) eithertheoffer isforalloutstandingsecuritiesofthe cash; (ii)theoffer isnotsubjecttoafinancingcondition; are notmaterialif:(i)theconsiderationconsistssolelyof unaudited historicalandcombined in theprecedingyear; the mostrecentinterimperiodandforcomparable full interimunauditedfinancialstatementsofthebidderfor years; income andcashflowstatementsforthelastthreefiscal balance sheetstatementsforthelasttwofiscalyearsand full auditedfinancialstatementsofthebidder, including comparable periodintheprecedingyear; financial informationforthelatestinterimperiodand bidder andthetarget company andselectedunaudited sheet informationforthepastfivefiscalyearseachof selected historicalauditedincomestatementandbalance arrangements betweenthetarget companyandthebidder. relating tothefinancingoftransactionandcontractsor exhibits, includingtenderoffer materials,loanagreements laws; and available) mustbeincluded fiscal yearsandunauditedforthemostrecentinterimperiod financial statementsofthebidder(auditedforlasttwo tendered andthetermsoftheircompensation; persons retainedtoassistinthesolicitationofsharesbe and entitiesrelatedtothebidderwithinpast60days; target companysecuritiesbythebidderandcertainpersons company sharesownedbythebidderandtransactionsin the interestintarget companysecurities,disclosingthetarget registration ofthetarget company’s stock; corporate structureorwouldaffect themarketabilityor would changethetarget company’s management,businessor the purposeoftenderoffer andplansofthebidderthat conditions toitsfinancing; the sourceandamountofbidder’s funds,includingany bidder andthetarget companyandanyconflictsofinterest; past contacts,transactionsandnegotiationsbetweenthe additional informationrelatingtoregulatoryissues, compliance withlaws,litigationandapplicabilityofantitrus r : The registrationstatementonFormS-4(FormF-4 or theofferor isapublicreportingcompany(if if material pro formapersharedata ; financialstatements pro forma and t

■ ■ Merger ■ ■ ■ ■ ■ ■ management ofeachcompanyon the otherhand. company oracquiringcompany, ontheonehand,andsenior regarding goldenparachutearrangements betweenthetarget proxy statementsarerequiredto includedetailedinformation response toquestion2.9,tender/exchange offer documents and In additiontothedisclosurenoted above,asdescribedinthe company, aswell and thetarget company, theMD&A oftheissuerandtarget the securitiesandtransaction,abusinessdescriptionofissuer and includeadescriptionofriskfactorswithrespecttotheissuer exchange (ascomparedtotender)offer documentsdescribedabove, are substantiallysimilartotheadditionalinformationrequiredin the acquiringcompany’s securitiesformpartoftheconsideration The contentrequirementsforaproxystatement/prospectuswhere financial datarelatingtotheacquiringcompanyisrequired. shareholders ofthetarget are voting,nofinancialor a merger inwhichtheconsideration offered iscashandonlythe business andtheMD&A ofthetarget arenotrequired.Generally, in the shareholdersoftarget arevoting,adescriptionofthe decision (e.g.,ifthereisafinancingcondition).Inaddition,only company willonlyberequiredifmaterialtoaninformedvoting A description ofthebusinessandMD&A oftheacquiring ■ ■ ■ ■ ■ ■ ■ ■ ■ a summaryofthetermsmerger; period. target companyforthelatestfiscalyearandinterim information givingeffect tothemerger ofthebidderand pro formaconsolidatedbalancesheetandincomestatement according toIASBIFRS;and GAAP orisaforeignprivateissuerthatprepares itsaccounts unless thebidderalreadypreparesaccountsaccordingtoU.S. reconciliation toU.S.GAAP (quantitativeand qualitative) company equitysecuritiesbeingsoughtintheoffer; comparison ofrightsholdersbiddersecuritiesandtarget business descriptionofthebidderandtarget company; and thetarget company; financial conditionandresultsofoperationsforthebidder management’s discussionandanalyses(MD&A)ofthe bidder, includingrisksrelatingtothecombinedentity; risk factorsrelatingtotheoffer andtothebusinessof a descriptionofthevotingprocedures. taken atthegeneralmeeting;and other organisational documentsandofanyotheractiontobe a descriptionofanyamendmenttothecharter, by-lawsor between theacquiringcompanyandtarget company; a descriptionofpastcontacts,transactionsandnegotiations approvals; a discussionofthestatusanynecessaryregulatory merger plan; a descriptionofthemerger agreementandoftheterms executive officers, includingtheircompensation; certain factsrelatingtothetarget companydirectorsand result inachangeofcontrolthetarget company; thereof and,totheextentknown,anyarrangementthatmay a descriptionofthevotingsecuritiesandprincipalholders (if any); an outlineofthedissentingshareholders’ rightsofappraisal be acteduponattheshareholders’ meeting; description oftheirinterest,directorindirect,inanymatterto the nameofperson(s)makingsolicitationanda shareholders; the date,timeandplaceofmeetingtarget company : The contentsoftheproxystatementmustinclude: pro formaandhistoricalfinancialstatements. WWW.ICLG.COM pro forma USA

415 USA 416 USA effective theregistrationstatementwithrespecttosuchsecurities. either inamerger orinanexchangeoffer, theSECmustdeclare mailed toshareholders.Ifsecuritiesareoffered asconsideration, The SECmustclearanydefinitiveproxymaterialsbeforetheyare 2.14 discussed intheresponsetoquestion6.1. fees maybepayableundercertaincircumstances.Breakare In theeventofanunsuccessfultransaction,breakortermination subject tofutureadjustmentsforinflation. be cappedatthelesserof$300,000and1%transactionvalue, are notexpectedtobeineffect untilthefirsthalfof2020,andwill rulemaking isrequiredbeforesuchfeesareimplemented.Such of 2018authorisedCFIUStocharge filingfees,butformal the fee). The ForeignInvestmentRiskReviewModernization Act transaction) atthetimeoffiling(inpractice,partiesoftenshare $45,000, $125,000or$280,000,dependingonthesizeof company isresponsibleforpaymentofthefilingfee(either as describedintheresponsetoquestion2.14below, theacquiring consideration). IfafilingisrequiredbytheHart-Scott-Rodino Act, the estimatedoffer priceofthesecuritiestobeoffered as SEC aregistrationfee,whichis$121.20per$1million(basedon If securitiesareissuedasconsideration,theissuerwillpayto merger. merger considerationtothetarget companyshareholdersina for sharestenderedintoatenderorexchangeoffer, andtopaythe paying agentretainedbytheacquiringcompanytoacceptandpay shares tobetendered.Feeswillalsopayabletheexchangeor fee to,aproxysolicitorwhowillassistinthesolicitationofvotesor company and/orthetarget companywillusuallyretain,andpaya documentation tothetarget companyshareholders. The acquiring company willincurcostsforprintingandmailingtherequired In additiontofeespaidlegalandfinancialadvisers,theacquiring 2.13 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM offer) after substantialcompliancewithanysuch request. The rules automatically until30days(10 withrespecttoacashtender both oftheparties,inwhichevent thewaitingperiodisextended or theDOJmayissuearequestfor additionalinformationtooneor FTC andtheDOJ.Duringinitial waitingperiod,eithertheFTC the acquiringcompanyandtarget companyfileanoticewith the between theparties,a30-daywaiting periodcommenceswhenboth or othertransactiontobeeffectuated pursuanttoanagreement notice within15daysoftheacquiringcompany’s filing.Inamerger notice withtheFTCandDOJ. The target companymustfilea day waitingperiodcommenceswhentheacquiringcompanyfilesa acquisition ofsecuritiesintheopenmarketfromathirdparty, a30- days oftheacquiringcompany’s filing.Inanexchangeoffer or FTC andtheDOJ. The target companymustfileanoticewithin10 waiting periodfromthedateacquiringpartyfilesnoticewith waiting periodhasexpired.Inacashtenderoffer, thereisa15-day parties havefiledanoticewiththeFTCandDOJstatutory transactions fromconsummatingtheirtransactionuntilafterthe The Hart-Scott-Rodino Act prohibitsthepartiestocertain respect tothesecuritiesbeissuedisdeclaredeffective. of thebiddermaynotbeissueduntilregistrationstatementwith however, theexchange offer cannotbeconsummatedandsecurities be disseminatedpriortothecompletionofSEC’s review; by theSEC.Inanexchangeoffer, theoffer documentgenerallymay are usuallycombinedintoasingledocumentthatwillbereviewed As describedabove,inamerger, theproxystatementandprospectus What consentsareneeded? What arethekeycosts?

not subjecttoCFIUSreviewifcertain conditionsaremet,including Acquisitions byinvestmentfunds with foreignlimitedpartnersare expected tobeimplementedbyCFIUS duringthefirsthalfof2020. only applytoinvestorsfromcountries specifiedinnewregulations expansion ofCFIUSreviewtonon-controlling transactionswill technologies orsensitivepersonal dataofU.S.citizens. This in aU.S.businessthatinvolvescriticalinfrastructure, transactions, inwhichaforeignpersonacquiresminorityinterest FIRMA authorisesCFIUStoreviewcertainnon-controlling access topersonalinformationofU.S.citizens.Mostsignificantly, reasons, andtransactionsinwhichaforeignpersoncouldgain acquisitions ofrealestatethatissensitivefornationalsecurity transactions thataresubjecttoCFIUSreview, expresslyincluding FIRMA codifiedwhathadbecomeCFIUS’s interpretationofthe country asaresultoftheacquisition. an acquiredU.S.businessmightbetransferredtothesanctioned country orentity, andwhetherproducts,technologyorfundsfrom a prospectiveforeignacquirerhashaddealingswithsanctioned of itsdeliberations,CFIUSisalsoauthorisedtoinvestigatewhether force thedivestmentofforeigninterestsinUSbusiness. As part a transaction,orinthecaseoftransactionthathasalreadyclosed, CFIUS mayrecommendthatthePresidentofUnitedStatesstop the partiesareunwillingtoabandontransactionvoluntarily, when anidentifiedrisktonationalsecuritycannotbemitigatedand undertaken throughmergers andtenderoffers. Inrare instances, arising fromforeigninvestmentsinU.S.businesses,includingthose U.S. (CFIUS)toidentifyandmitigaterisksnationalsecurity (FIRMA), authorisestheCommitteeonForeignInvestmentin the ForeignInvestmentRiskReviewModernization Act of2018 The DefenseProduction Act of1950,asamendedmostrecentlyby basic businessdecisionsoftheissuer). participating intheformulation,determinationordirectionof inconsistent withaninvestmentintent( filings incircumstanceswheretheirconductisallegedtobe investors whohavefailedtomakenecessarypre-merger notification Scott-Rodino Act, andhavebroughtcharges inrecentyearsagainst the “investmentonly”exceptionasanarrowtoHart- basic businessdecisionsoftheissuer”. The DOJandtheFTCview participating intheformulation,determinationordirectionof does sosolelyforthepurposeofinvestmentwith“nointention issuer withoutmakingafilingundertheHart-Scott-Rodino Act ifit Act andrelatedrules,anentitycanbuyupto10%oftheshares Under the“investmentonly”exceptiontoHart-Scott-Rodino 2019. size oftransactiontestandthelarge transactiontestinlateJanuary expected toannouncenewthresholdsforthesizeofpersontest, target companyinexcessof$337.6million. The FTCandDOJare hold anaggregateamountofvotingsecurities(and/orassets)the met if,asaresultoftheacquisition,acquiringcompanywould million. As ofDecember31,2018,the“large transaction”testis securities (orassets)ofthetarget companyinexcessof$84.4 acquiring companywouldholdanaggregateamountofvoting size oftransactiontestismetif,asaresulttheacquisition, net salesofatleast$168.8million. As ofDecember31,2018,the at least$16.9million,andtheotherpartyhastotalassetsorannual person testismetifonepartyhastotalassetsorannualnetsalesof of thesizepersontest. As ofDecember31,2018,thesize or (2)the“large transaction”testismet,regardlessoftheoutcome both the“sizeofperson”andtransaction”testsaremet; notice willberequiredtofiledwiththeFTCandDOJ,when:(1) take anyfurtheraction. The Hart-Scott-Rodino Act willapply, and during theinitialwaitingperiodFTCandDOJdeterminenotto also provideforearlyterminationoftheinitialwaitingperiodif ICLG TO: MERGERS &ACQUISITIONS 2019 i.e., nointentionof USA

covenants, pre-emptivedivestituresandreverseterminationfees. aware oftheoptionsavailabletoallocaterisk,includingmitigation Prospective buyersandsellersofsensitivebusinessesshouldbe national securityconcernsidentifiedduringthereviewprocess. recommending atransaction,CFIUSmayrequirepartiestomitigate number ofcasesrequiringsecond-stageinvestigations.Before by theirtechnologiesandservicesarealikelycontributortothe businesses andthedataprivacycybersecurityissuesimplicated particular attentionfromCFIUS. The complexityoftheacquired and transactionsinvolvingChineseinvestorshavereceived period. Transactions inthe informationandcommunicationssectors greater percentageoftransactionsfollowingtheinitialreview transactions byCFIUS,withCFIUSrequiringinvestigationsina In recentyears,wehaveseenincreasinglyrigorousscrutinyof declarations ofcertaintransactionsinvolvingcriticaltechnologies. regulations establishingapilotprogrammerequiringmandatory provisions ofFIRMA.CFIUShasalreadyissuedinterim regulations willberequiredtoimplementthenewdeclaration access tosensitivepersonalinformationofU.S.citizens.CFIUS being acquiredinvolvescriticaltechnology, criticalinfrastructureor a substantialinterestintheforeigninvestor–ifU.S.business transactions –particularlythoseinwhichaforeigngovernmenthas 45 dayspriortoclosing.Declarationswillberequiredforcertain transactions willtriggerthefilingofmandatorydeclarationsatleast transaction ifthepartiesareuncooperative.Certaincovered notice ofthetransactionorbyinitiatingaunilateralreview days torespond,eitherbyclearingthetransaction,seekingafull Following submissionofthenewdeclaration,CFIUSwillhave30 shorter declarationtopotentiallygainafasterresponsefromCFIUS. are pursuinglesssensitivetransactionswillbepermittedtosubmita business daysaftersubmission.Foreigninvestorswhobelievethey on thedraftCFIUSnoticeandacceptformalwithin10 CFIUS jurisdiction,willberequiredtoprovidecomments provides thatwhenpartiesstipulateatransactionissubjectto (currently 45days)inextraordinarycircumstances.FIRMA also potential 15-dayextensionofthesecond-stageinvestigationphase extends theinitialreviewphasefrom30daysto45days,witha necessary, asecond-stage45-dayinvestigationstage.FIRMA frame thatincludeda30-dayinitialreviewperiodand,when grounds. PriortoFIRMA,CFIUSoperatedunderastatutorytime presidential actionsmayonlybechallengedonconstitutional for judicialreviewofCFIUSactionsanddecisions,although, filings thatinsomecaseswillbemandatory. FIRMA alsoprovides establishment offilingfeesandthecreationshort-formsummary CFIUS process,includingadjustmentstothetimeline, FIRMA introducedanumberofadministrativechangestothe governance andinformationrightsbytheforeignlimitedpartners. management ofthefundbyaU.S.generalpartnerandlimited Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 level ofshareholderapprovalrequired undertheprincipalU.S. a merger isamajorityofthesharesissuedandoutstanding. The The levelofshareholderapproval required underDelawarelawfor the responsetoquestion7.4. target company. Back-endmergers aredescribedinfurtherdetail in in thetarget companybymerging theacquisitionsubsidiarywith completion oftheoffer, thebidderacquiresall oftheequityinterests the target company’s sharesthrough theoffer, thenfollowing transaction tosucceed.Generally, ifthebidderobtainsamajorityof minimum numberofsharesthatmustbetenderedinorderforthe In acashtenderoffer orexchange offer, thebidderspecifies 2.15 What levelsofapprovaloracceptanceareneeded?

consummate atransaction. funding inevaluatingtheacquiringcompany’s abilityto acquiring company’s financingcommitmentsandothersourcesof auction situation. The target companywillcloselyscrutinise an acquiring company’s fundsinassessingabid,particularlyan practical matterthetarget companywilllooktothecertaintyofan committed andavailablepriortotheabove-notedtimes,asa While thereisnolegalrequirementthatcashconsiderationbe consideration (subjecttostateappraisalrights,ifany). are cancelledandonlyrepresenttherighttoreceivemerger effectiveness ofthemerger, atwhichtimethetarget companyshares In amerger, themerger considerationbecomespayableupon securities acceptedinanoffer promptlyuponclosingoftheoffer. Under thetenderoffer rules,thebiddermustpayfortendered 2.16 independent orbeenacquiredbya thirdparty. not succeedandthetarget companyhaseitherremained board’s conductisreasonable. As aresult,many hostileoffers do defensive actioninoppositiontoan unsolicitedoffer, solongasthe response toquestion8.2,atarget boardhasbroadlatitudetotake cooperation ofthetarget company board. As discussedinthe difficult forabiddertocomplete ahostileoffer withoutthe opted outofanyapplicablestateanti-takeoverstatute,itwillbe If thetarget companyhasapoison pillorthetarget companyhasnot proceed withanyproposal. consideration, thetarget company boardmaydeterminenotto are notobligatedtoputthecompanyupforsale. After due simply becauseaproposalismade,directorsofthetarget company best interestsofthetarget company anditsshareholders.However, any target companyshouldcarefully evaluateingoodfaiththetermsof company isnot“forsale”,themanagementandboardof hand abidthatiseconomicallyattractivetoshareholders.Evenif in today’s environmentforatarget companyboardtorejectoutof Given thesignificantinfluenceofactivistshareholders,itisdifficult bidder. alternative transactionornegotiatebettertermswiththehostile anti-takeover devicesgivethetarget companyboardtimetoseekan company board’s bargaining power. As apracticalmatter, these discussed intheresponsetoquestion8.2,thatincreasetarget such asashareholderrightsplan(alsoknown“poisonpill”) complete. Somecompanieshaveinplaceanti-takeoverprotections, Hostile transactionsmaybetime-consuminganddifficult to 3.1 approval. certificate ofincorporation,withsomerequiringsupermajority incorporation ofthetarget companyandthetarget company’s Shareholder approvalrequirementsvarydependingonthestateof convened forsuchpurposeatwhichaquorumispresent. present (eitherinpersonorbyproxy)andvotingatameeting a company’s outstandingsharesisgenerallyamajorityofthe securities exchangesfortheissuanceofsharesinexcess20% 3 bona fide and available? Friendly orHostile When doescashconsiderationneedtobecommitted Is thereachoice? unsolicitedproposaltodetermineiftheoffer isinthe WWW.ICLG.COM USA

417 USA 418 USA negotiating andapprovingsuchtransactions. committees, consistingentirelyof independent directors,thetaskof process, boardsofdirectorsoften willdelegatetospecial shareholders aretreatedfairly. To helpensurethefairnessof imposed onthetarget companyboardofdirectorstoensure its considering itagainstotheralternatives. A greaterburdenwillbe whether toentertainthegoingprivatetransactionandprocessfor them frominvolvementinthetarget company’s evaluationof of thebuyoutgroup,willhaveaconflictinterestwhichbar members ofseniormanagementthetarget companywhoarepart shareholders seekingtotakethetarget companyprivate;or(ii) question 1.6),boardmemberswhoarealso:(i)significant In agoingprivatetransaction(asdescribedintheresponseto when consideringatransaction. directors andofficers, solong asshareholdersarefullyinformed progeny providesapotentiallypowerfullitigationtooltocorporate informed andun-coercedshareholders. The decisionandits judgment rule”ifthetransactionisapprovedbyamajorityoffully standard wouldinsteadbereviewedunderthedeferential“business that achangeofcontroltransactionsubjecttotheenhancedscrutiny to question8.2below. In2015,theDelawareSupremeCourtheld under theenhancedscrutinystandard,asdiscussedinresponse action ischallenged,theconductofboardwillbereviewed action inresponsetoanunsolicitedacquisitionproposalandsuch directors’ actions.Ifatarget company’s boardtakesdefensive the directors’ decision-makingprocessandthereasonablenessof reasonable. The enhancedscrutinystandardinvolvesareviewof “enhanced scrutiny”standardtoassurethattheirconductwas below, thecourtswillreviewconductofdirectorsunderan referred toas“ transaction reasonablyavailableforshareholders(commonly including Delaware,thedirectorshaveadutytoseekbest determines tosellthecompany, thenunderthelawofmanystates, target company’s boardofdirectors.Ifthetarget companyboard merger oratakeover, thespotlightisoftenonconductof In situationsinvolvingasignificantcorporatetransactionsuchas 3.3 consensual transactionareabandonedbytheparties. bidder inahostileoffer afternegotiationswithrespecttoa agreement mayprohibittheuseofconfidentialinformationbya an expressstandstillprovision,the“non-use”provisionsin a thirdparty. Evenifanon-disclosureagreementdoesnotinclude transaction withanotherpartyorbecomessubjecttoahostilebidby negotiate exceptionstotheprovisioniftarget entersintoa limit thedurationofanystandstillprovision,andwilloftenseekto transaction. The potentialacquiringcompanywilltypicallyseekto and thepotentialacquiringcompanydonotresultinaconsensual unsolicited approachifnegotiationsbetweenthetarget company agreement willoftenincludea“standstillprovision”topreventan transaction. Forapubliccompanytarget, thenon-disclosure acquiring companyinconnectionwithitsconsiderationofa restricts thedisclosureanduseofinformationprovidedto acquiring companytoenterintoanon-disclosureagreementthat potential acquiringcompany, itiscommonforthetarget andthe Before atarget companyprovidesconfidentialinformationtoa acquiring companytoapproachatarget. There arenostatutorylimitationsontheabilityofapotential 3.2 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM How relevantisthetargetboard? Are thererulesaboutanapproachtothetarget? Revlon duties”).Exceptincircumstancesdescribed

functioning specialcommitteeofthetarget companyboard shareholder challengingthetransactionifthereisaproperly structured asamerger, thisburdenofproofmayshifttothe dealing andprice,exceptthatinagoingprivatetransaction burden ofprovingtheentirefairnesstheiractions,astoboth review. Underthe“entirefairness”standard,directorsbear negotiations, “entirefairness”willbetheapplicablestandardof private transactionfromthestartofsubstantiveeconomic followed bythetarget boardinacontrollingshareholdergoing the unaffiliated minorityshareholders.Ifsuchpracticesarenot coerced, fullyinformedandnon-waivableapprovalofamajority own financialandlegaladvisers;(ii)conditionedontheun- which isfullyempoweredtodeclinethetransactionandretainits attentive specialcommitteecomprisedofindependentdirectors, transaction iftheis:(i)negotiatedandapprovedbyan standard forreviewingacontrollingshareholdergoingprivate The deferentialbusinessjudgmentrulewillbetheapplicable The target companyboardcommunicatesitspositiononanoffer by hostile. the offer appliesregardlessofwhethertheoffer is friendly or inability totakeaposition. The dutytocommunicateapositionon a position,andthereasonsforpositiontaken,lackofopinionor respect totheoffer orthatitexpressesnoopinionisunabletotake company boardmustadviseitsshareholdersofpositionwith If atenderoffer orexchangeoffer iscommenced, thetarget appropriate. determine whethertheapplicationofbusinessjudgmentruleis shareholder, courtswillcloselyscrutinisetheunderlyingfactsto implemented inatakeprivatetransactioninvolvingcontrolling transaction. Eveniftheproceduralmeasuresdescribedaboveare by target companyshareholdersnotstandingonbothsidesofthe transaction issubjecttotheapprovalofamajoritysharesheld mailing tothetarget companyshareholdersaSolicitation the responsetoquestion2.11, thetarget companywillfilewiththe company fileanddisseminateaSchedule 14D-9. As discussedin In amerger transaction,thereisnorequirementthatthetarget unsolicited bidcouldresultinanSEC enforcementactionandfines. unsolicited bid.Failuretodisclose actionstakeninresponsetoan 9, includinganyactionsthetarget istakinginresponse to an all materialchangestotheinformationsetforthinaSchedule14D- The target companyboardmust promptlydiscloseanddisseminate ■ ■ ■ ■ requires disclosureofinformationrelatingto: trading marketsanddeliveringittothebidder. Schedule14D-9 without firstfilingaSchedule14D-9withtheSECandappropriate to, thetarget company’s shareholderswithrespecttotheoffer any otherpersonispermittedtosolicit,ormakearecommendation been commenced,neitherthetarget company, itsmanagementnor Recommendation StatementonSchedule14D-9.Onceanoffer ha stage. negotiations arebeingundertakenandinapreliminary such transactionorthepartiesthereto,butmustdisclosethat target companyisnotrequired todisclosethetermsofany believes thatdisclosurewouldjeopardisenegotiations,the in principlehasbeenreachedandthetarget companyboard transactions inresponsetothetenderoffer. Ifnoagreement negotiations ofthetarget company withrespecttosignificant company inconnectionwiththetenderoffer; and solicitations orrecommendationsonbehalfofthetarget the identityandcompensationofpersonsretainedtomake the reasonsforitsrecommendation; the recommendation,ifany, ofthetarget companyboard,and target companyandthebidderitsaffiliates; agreements, arrangementsorunderstandingsbetweenthe ICLG TO: MERGERS &ACQUISITIONS 2019 USA or the s /

that maybeavailabletothepublic. industries maymakefilingswithapplicable governmentregulators information. bidder’s diligencewillbelimitedtoareviewofpubliclyavailable In addition,withoutthecooperationoftarget company, the board atameetingofthetarget company’s shareholders. bidder wouldnotbeabletoobtaincontrolofthetarget company and permittheremovalofdirectorsonlyforcause,inwhichcase certificate ofincorporationmayprovideforstaggereddirectorterms companies haveeliminatedstaggeredboards,thetarget company’s bidder totakecontrolofthetarget company’s board. Although most directors inadvanceofameeting,therebydelayingtheability management, ormayproscribespecificproceduresfornominating act bywrittenconsentwithouttheofboardor which maylimittheabilityofshareholderstoconveneameetingor by thetarget company’s certificateofincorporationandbylaws, facilitate thebidder’s offer. The bidder’s strategywillbeinfluenced target company’s directorswiththebidder’s nomineeswhowill the target companyshareholdersforthepurposeofreplacing the bidderseekstoforcetarget companytoconveneameetingof A tenderoffer maybecombinedwithaproxysolicitationinwhich applicable stateanti-takeoverstatute. “poison pill”orthetarget companyhasnotoptedoutofany the target companyboard,especiallyifthetarget companyhasa difficult forabiddertocompleteanoffer withoutthecooperationof discussed intheresponsetoquestion3.1,however, itmaybe cooperation ofthetarget companyboardormanagement. As consummated quickly, andgenerallydoesnotrequirethe because itcanbecommencedand,subjecttothefollowingsentence, The tenderoffer isthemosteffective structureforahostileoffer 3.4 recommendation withrespecttothemerger. the factorsconsideredbytarget companyboardinreachingits respect tothemerger, itsreasonsforthemerger, andadescriptionof will includethetarget companyboard’s recommendationwith SEC anddisseminatetoitsshareholdersaproxystatementwhich Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 SEC’s website,www.sec.gov and proxystatementsareavailable, amongotherplaces,onthe target companyshareholders.Suchreports,registrationstatements company hasusedtosolicitproxiesinconnectionwithmeetingsof issuance ofsecurities,aswellanyproxystatementsthatthetarget statements thatthetarget company hasfiledinconnectionwiththe acquiring companyalsowillhaveaccesstoanyregistration target company’s certificateof incorporation orby-laws. The departure orelectionofofficers ordirectorsandamendmentstothe the completionofanacquisitionordispositionassets, other things,theentryintoorterminationofamaterialagreement, would requirethetarget company tofileaForm8-Kinclude,among Q andreportsofmaterialeventsonForm8-K.Materialthat interim reportsforeachofthefirstthreefiscalquartersonForm10- SEC, includingthetarget company’s annualreportonForm10-K, access toallofthetarget company’s periodicreportsfiledwiththe If thetarget companyispublic,theacquiringwillhave 4.1 4 Information Does thechoiceaffectprocess? What informationisavailabletoabuyer? . Companiesoperatinginregulated

a non-disclosureagreement. information fromatarget companyifbothpartiesarewillingtosign An acquiringcompanymayalsobeabletoobtainnon-public on theSEC’s website. access toallthisinformationasitisavailable,amongotherplaces, (Schedule 13DorSchedule13G). The acquiringcompanywillhave company andtheirintentionswithrespecttothetarget company to reporttheSECinformationontheirshareholdingsintarget 5% ofaclassequitysecuritiesthetarget companyarerequired 5.3, underSection13(d)oftheExchange Act, beneficialownersof in suchholdings(Form4). As describedintheresponsetoquestion on theirshareholdingsinthetarget company(Form3)andchanges of thetarget companyarerequiredtoreporttheSECinformation directors andbeneficialownersof10%aclassequitysecurities In addition,underSection16oftheExchange Act, officers, would inanyeventnotbe“material”,particularlyifpursued. obligation. Inmanycases,suchcontactorpreliminarynegotiation obligations, assumingnocircumstancesexistwhichcreatedsuchan discussions followingsuchcontact,shouldnottriggerdisclosure seeking toacquireallorpartofthetarget company, orpreliminary application ofthisrule,initialconfidentialcontactfromaparty to disclosemayornotbeimplicated). As aparticular statement (dependingonthesubjectofproxystatement,aduty disclosure underoneofthelineitemsform),oraproxy due), acurrentreportonForm8-K(iftheactionsinquestiontrigger periodic report,suchasaForm10-Kor10-Q(ifoneisthen the eventeitherpartyisinprocessofregisteringitssecurities),a SEC formthenbeingapplicable,suchasaregistrationstatement(in company’s securities,or(4)specificdisclosurerequirementsofan officers ordirectorsengaginginpurchasessalesofthetarget attributable tothetarget company, (3)thetarget companyorits incomplete orpriordisclosurebythetarget company, (2)aleak under thefederalsecuritieslaws,absent(1)aninaccurate, In general,thereisnodutytopubliclydisclosematerialinformation 4.2 activity inthetarget company’s stockwould Neither rumournorspeculationin themarketnorunusualtrading be jeopardised. of directorstheregistrantdetermines thattheacquisitionwould business soughtiftheacquisition is notyetprobableandtheboard disclose inregistrationstatementstheidentityandnatureof confidentiality ofnegotiations,theSECpermitsregistrantsnotto dispositions ofbusinesses. To accommodatetheneedfor requires disclosureofmaterialprobableacquisitionsand of registeringsecuritiesforsaleundertheSecurities Act, theSEC the transaction.However, whereoneofthepartiesisinprocess premature disclosureofnegotiationsmayjeopardisecompletion balancing theinformationalneedsofinvestorsagainstriskthat acquiring company. This positionisbasedontheSEC’s policyof disclosed intheperiodicreportsoftarget companyorthe There isnorequirementthatpreliminarymerger negotiationsbe to anaffirmative disclosure obligation iffactschange. care shouldbetakentoavoidmakingstatementsthatcouldgiverise the promptdisclosureexceptionstogeneralrule.Forexample, “material”, ongoingcareneedstobetakenavoidtriggeringanyof because informationwithrespecttoapotentialtransactionmaybe general rulethatdisclosureisnotrequiredstillapplies.However, the company. Evenifmaterialdiscussionsarecommenced,the to assessthelikelihoodofatransactionanditspotentialimpacton Materiality isdeterminedbyapplyingaprobability/magnitudetest affirmative disclosureobligationunderthefederal securitieslaws. Is negotiationconfidentialandisaccessrestricted? WWW.ICLG.COM per secreatean USA

419 USA 420 USA 2.12 forfurtherdetail. is requiredtodisclosetheprojections.Seeresponsequestion of amerger ortenderitssecurities intoanoffer, thetarget company would bematerialtoaninvestor’s decisionwhethertovoteinfavour provided projectionstotheacquiringcompanyandsuch by thetarget companyforuse initsanalysis.Ifthetarget company reaching itsopinion,includingprojectionsprovidedtotheadviser information aboutthemethodologyusedbythirdpartyin statement ortheprospectus,reportmustbedisclosed,aswell financial adviser)andsuchreportisreferredtointheproxy from athirdparty( financial statements. Any timeareportoropinionhasbeenreceived acquiring andtarget company, aswell description oftheacquiringandtarget company, anMD&A ofthe statement/prospectus willincluderiskfactors,abusiness additional business daysifthereisachangeinthe priceorthe five additionalbusinessdaysafter suchchange,andatleast10 a tenderoffer orexchangeoffer, theoffer mustbekeptopenatleast change ismadebytheacquiringcompany totheoffer document in becomes inaccurateormaterially misleading.Ifanymaterial disseminated tothetarget companyshareholdersifthatinformation The acquiringcompanymustupdate andcorrectinformation 4.4 transaction. Any timesecuritiesarebeingoffered aspartofthe the transactionandplansfortarget companyfollowingthe certain typesoftransactions,theacquiringcompany’s purposefor offer documentortheproxysolicitationmaterials,aswellas,for acquiring companyandthetarget companywillbedisclosedinthe All materialpastcontacts,transactionsandnegotiationsbetweenthe the agreement. in theordinarycourseofbusiness,describingmaterialterms current reportonForm8-Kifitentersintoamaterialagreementnot however, under the Exchange Act, anissuerisrequiredtofilea announcement orcommencementofanoffer foracompany; There isnostatutorytriggerintheUnitedStatesrequiring 4.3 who thentradeonthebasisofsuchinformation. must notdisclosesuchmaterialnon-publicinformationtopersons the acquiringcompanywhileinpossessionofsuchinformation,and or offer) mustrefrainfromtradingsharesofthetarget companyor material non-publicinformation(suchasthependencyofamerger jeopardise completionofthetransaction.Inaddition,personswith discussions soastoavoidprematureleaksthemarketthatmay generally willlimitthenumberofpersonswhoareaware practical matter, companiesengagedinmerger negotiations material informationhasagreedtoholditconfidential. As a K. The disclosurerequirementisnottriggerediftherecipientof disclosure ofthatinformationbyfilingacurrentreportonForm8- who maytradeontheinformation,companymustmakepublic public informationtoaninvestmentprofessionalorshareholder person actingonbehalfofapubliccompanyprovidesmaterialnon- disclosure ofmaterialnon-publicinformationisprohibited.Ifa information withrespecttomerger negotiations;however, selective There isnolegalrequirementthatacompanyrestrictaccessto merger negotiations. results inadecisionbytarget companytodisclosepreliminary However, unusualtradingactivitymaycreatepracticalpressurethat Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM consideration, theexchangeoffer documentorproxy become public? What iftheinformationiswrongorchanges? When isanannouncementrequiredandwhatwill e.g., afairnessopinionfromthetarget company’s pro formaandhistorical

by resolution,waivesapplication ofstateanti-takeoverlaws. takeover transactions,theboardof directorsofthetarget company, response toquestion1.1.Generally, in“friendly”non-contested of theapplicabilitystateanti-takeoverstatutes,asdiscussedin bidder toimplementabusinesscombinationunderstatelawbecause Although permitted,stakebuildingmaylimittheabilityof offer isprohibitedfromtrading inthetarget company’s stock. in possessionofmaterialnon-publicinformationaboutthetender substantial steporstepstocommenceatenderoffer, thenanyperson outside oftheoffer. Inaddition, if apotentialbidderhastaken purchasing shares,ormakingarrangementstopurchase expires, thebidderisprohibitedfromdirectlyorindirectly announcement ofatenderoffer orexchangeoffer untiltheoffer prohibit suchpurchases).However, fromthetimeofpublic possession ofmaterialnon-publicinformation,whichwould company inadvanceofanoffer (assumingthebidderisnotin There isnoprohibitiononthebidderpurchasingsharesoftarget 5.1 qualitatively. in amaterialadverseeffect whenconsideredbothquantitativelyand compliance problems,whichwouldreasonablybeexpectedtoresult evidence ofwidespreadregulatoryviolationsandpervasive the merger agreement. The courtalsofoundoverwhelming exceptions tothedefinitionofmaterialadverseeffect includedin abating, andcouldnotbeattributedtoindustrydeclineorother target's businesswasdurationallysignificantwithnosignof inquiry, andgroundeditsfindingonthefactthatdeclinein whether amaterialadverseeffect hasoccurredisafact-specific target company. Initsanalysis,thecourtnotedthatdetermining the merger agreementbecauseofamaterialadverseeffect onthe the acquirerinamerger transactioncouldappropriatelyterminate affirmed bytheDelawareSupremeCourt)finding,aftertrial,that agreement oranoffer onthatbasis.InOctober2018,theDelaware financial conditionofthetarget company, andtoterminateamerger prove thatamaterialadverseeffect hasoccurredinthebusinessor agreement. As ageneralmatter, itremainsdifficult forabuyerto the merger orthetenderoffer beingmadepursuanttothemerger company, theacquiringcompanymayhaveabilitytoterminate change islikelytohaveamaterialadverseeffect onthetarget agreement andtheclosingofmerger ortenderoffer, andsuch about thetarget companychangesbetweenthesigningof condition inthemerger agreement. Accordingly, ifinformation The acquiringcompanyoftennegotiatesamaterialadverseeffect material changesintheinformationsetforthSchedule14D-9. A target companymustpromptlydiscloseanddisseminateall sufficient. meeting dateisgenerallyconsideredbylegalprofessionalstobe calendar daysbetweenthedisseminationofsupplementand sought. Although thereisnominimumstatutorytimeperiod,10 advance oftheshareholdersmeetingatwhichtheirvoteisbeing supplemented andrecirculatedtoshareholderssufficiently in made toaproxystatement,thestatementmustbe percentage ofsecuritiessoughtintheoffer. Ifamaterialchangeis target company board,asdiscussedintheresponse toquestion1.1, initial acquisitionofshareswas not approvedinadvancebythe acquisition statuteorabusinesscombination statuteandthebidder’s However, ifthetarget companyissubjecttoacontrolshare Court ofChanceryissuedthefirstopinioninDelaware 5 Stakebuilding Can sharesbeboughtoutsidetheofferprocess? ICLG TO: MERGERS &ACQUISITIONS 2019 (subsequently USA

Exchange Act givingthe SECauthoritytobroadenthedefinition of investor’s position. The Dodd-Frank Act amendedSection13ofthe voting rights,andthereforewithout requiringdisclosureofthe the economicbenefitsofownership ofasecuritywithoutobtaining Some investorsusederivativesand othersyntheticpositionstogain in ownershipisconsideredmaterial). intent orachangeinthepercentage ofsharesowned(a1%change promptly afteramaterialchange,whichmayconsistofchangein the target company. Amendments toSchedule13Dmustbefiled between theholderandanypersonwithrespecttosecuritiesof 5.3 period, ifthesecuritywasownedbeforeannouncementofoffer. into securitiesthatarethesubjectofoffer duringtheoffer representative mayalsoconvert,exchangeorexerciseasecurity course ofbusiness,andnottofacilitatetheoffer. A bidderorits purchased priortotheannouncementofoffer intheordinary securities duringtheoffer periodifthederivativesecuritieswere representative maypurchasesharestosettlecertainderivative certain exceptionstotheserestrictions.Forexample,abidderorits into, exchangeablefor, orexercisableforsuchsecurities. There are subject oftheoffer orsecuritiesthatareimmediatelyconvertible offer period,purchaseorarrangetosecuritiesthatarethe A bidderorarepresentativeactingonitsbehalfmaynot,duringthe 5.2 time. shares ortoeffect abusinesscombinationtransactionforperiodof the bidderwillberestrictedinitsabilitytovotetarget company Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 securities ( background oftheholder;(ii)purposeacquisition disclosure ofthefollowinginformation:(i)identityand corporate control.Schedule13Drequires,amongotherthings, the acquiringparty, itsintentionsandthelikelihoodofachangein The purposeofSchedule13Distogiveinvestorsinformationabout power torevokeatrustordiscretionaryaccount. warrant, optionorright,conversionofasecuritypursuanttothe power overthatsecuritywithin60daysthroughtheexerciseofany security ifsuchpersonhastherighttoacquirevotingorinvestment of, thesecurity. A personwillalsobedeemedtobeneficiallyowna power includesthetodisposeof,ordirectdisposition power tovote,ordirectthevotingof,security, andinvestment power withrespecttosuchsecurity. Voting powerincludesthe relationship orotherwise,hassharesvotingpowerinvestment or indirectly, throughanycontract,arrangement,understanding, ownership ofasecurityifsuchpersonorgrouppersons,directly Act, apersonorgroupofpersonswillbedeemedtohavebeneficial ownership threshold.PursuanttoRule13d-3undertheExchange be filedonSchedule13Dwithin10daysofcrossingthe5% person’s ownershipofthesubjectsecurities.Suchstatementmust a statementthatdisclosescertaininformationrelatingtosuch a classofregisteredequitysecuritiesisrequiredtofilewiththeSEC of personswhoacquiresbeneficialownershipgreaterthan5% Pursuant toSection13(d)oftheExchange Act, anypersonorgroup existence ofanycontract,arrangement,understandingo amount offundsusedinmakingthepurchases;and(iv) transactions involvingthetarget company;(iii)thesourceand acquisition ofadditionalsecuritiesoranyextraordinarycorporate or proposalswithrespecttothedispositionofsuchsecurities, the offerperiod? derivatives stakebuildingbeforetheofferandduring What arethedisclosuretriggersforsharesand Can derivativesbeboughtoutsidetheofferprocess? e.g., toseekcontrolofthetarget company)andanyplans r relationship

Schedule 13D. may fileashort-formSchedule13GwiththeSEC securities anddonotseektoinfluencecontrolofthetarget company beneficially ownlessthan20%ofaclassregisteredequity Certain personsotherwiserequiredtofileaSchedule13Dwho beneficial ownershipreportingregime. new rulesaddressingtheseperceivedshortfallsintheexisting filing onSchedule13D;however, theSEC,todate,hasnotadopted beneficial ownership,aswelltoshortenthereportingwindowfor provisions inacquisition agreementsinorder to achievethe buyers andsellersspendingmore timenegotiatingregulatory States andforeigngovernments in recentyearshasresulted An increasedlevelofantitrustenforcement activitiesbytheUnited financing andclosethetransaction. seller wouldhavetheabilitytorequire thebuyertodrawuponits unavailable notwithstandingthe buyer’s efforts; otherwise,the closing thetransactiononlyifbuyer’s debtfinancingis that allowsthebuyertopayareverseterminationfeeandavoid buyers haveemployedareverseterminationfeeremedystructure acquisition agreementsfortransactionsinvolvingprivateequity remedies suchasspecificperformance.Inrecentyears,most complete atransactionandtolimittheavailabilityofequitable target companymightotherwise beentitlediftheacquirerfailsto the paymentofareverseterminationfeetocapdamageswhich monetary damages.Privateequityacquirershavecometorelyon to seekequitableremedies,suchasspecificperformance,or under themerger agreement, thetarget companywouldbeentitled the transactionforanyotherreasoninbreachofitsobligations the transaction.Ineventacquirerotherwisefailedtoclose were payablesolelyifthebuyerwasunabletosecurefinancingfor equity buyersthatwerenotsubjecttoafinancingcondition,and These feeswereinitiallyincludedintransactionsinvolvingprivate fees” thatpenaliseacquirerswhodonotcompletetransactions. Merger agreementsmayalsoincludeso-called“reversetermination agreements. the target companyintheeventofsuccessivetermination Although rare,itmaybepossibleformultiplefeestopayableby of thebreakfeeshouldnotbesolarge astodeterarivalbidder. if alengthypre-closingperiodisanticipated.Inanyevent,thesize is atthehighendoftarget companybanker’s “fairness range”,or of anauctionprocess,thepricebeingpaidbyacquiringcompany uncommon. A larger feemaybejustifiableifitisgrantedattheend approximately 3%ofthetarget company’s equityvaluearenot intervening eventisdeemedtohaveoccurred). Termination feesof offer (eitherinresponsetoasuperiorproposalorwherean company boardofitsrecommendationtheacquiringcompany’s the acceptanceofacompetingoffer orthewithdrawalbytarget payable bythetarget companyiftheagreementisterminatedupon Merger agreementstypicallyprovideforterminationorbreakfees 6.1 of publicannouncementatender/exchangeoffer untiltheoffer As discussedintheresponsestoquestions5.1and5.2,fromtime 5.4 offer. shares, ormakingarrangementstopurchaseoutsideofthe expires, thebidderisprohibitedfromdirectlyorindirectl 6 Deal Protection Are breakfeesavailable? What arethelimitationsandconsequences? WWW.ICLG.COM in lieu y purchasing offilinga USA

421 USA 422 USA grounds tobelieve thataninterlopingbidwouldnot beinthebest enhanced scrutinystandardrequires thattherebereasonable response toquestion8.2. As appliedto dealprotectiondevices,the are often,althoughnotuniformly, similar)describedbelowinthe the “enhancedscrutiny”standard (standards inotherjurisdictions protection deviceswillbereviewed bytheDelawarecourtsunder cause anantitrustproblemfora potential interloper. Suchdeal significant jointventure,sellassets,oragreetobuyassetsthatmight knight”, arepermissible. The target companymayalsoenterintoa protection devices,suchastheissuanceofsharestoa“white Subject tothefiduciarydutiesoftarget companyboard,deal 6.3 target companytolockupa favourabletransaction. best valuereasonablyavailabletoshareholderswhileallowingthe directors additionalcomfortthattheywillbeabletoseekoutthe The presenceofagoshopprovisioncangivetarget company that maynotresultinasuperiorproposalforthetarget company. confidential informationwiththirdparties(includingcompetitors) transaction tothirdpartiesandproactivelysharesensitive, they areunwillingtopermittarget managementtoshopanagreed strategic buyer. Strategicbuyersfrequentlyrejectsuchrequests,as target companymayalsorequestagoshopprovisionfrom more commoninagreementsinvolvingprivateequitybuyers,buta without engaginginafullauctionprocess.Goshopprovisionsare company entersintoanagreementonacceleratedtimeframe Acquirers maybewillingtoacceptagoshopprovisioniftarget alternative transactionisreceivedduringthegoshopperiod. provide foralowerbreakfeeifsuperiorproposalresultinginan 30–45 days)afterthesigningofadefinitivemerger agreementand seek outsuperiorproposalsforaspecifiedperiodoftime(typically which specificallypermitatarget company’s boardofdirectorsto Additionally, merger agreementsmayinclude“goshop”provisions, company board. reasonably likelytoviolatethefiduciarydutiesoftarget recommendation ifconsummatingthetransactionwouldbe company boardtoterminatethemerger agreementorchangeits consummated. Noshopcovenantsgenerallypermitthetarget subject toafinancingconditionandreasonablylikelybe defined asafinanciallysuperior, allcashoffer forallshares,not likely toleadasuperiorproposal. A “superiorproposal”isoften an unsolicitedbasisifengaginginsuchdiscussionsisreasonably information to)athirdpartythatapproachedthetarget companyon company boardtoengageindiscussionswith(andprovide such covenantstypicallycontainanexceptionpermittingthetarget In lightofthetarget companyboard’s fiduciaryduties,however, information to,orengagingindiscussionswith,third-partybuyers. soliciting alternativeacquisitionproposalsfrom,providing typical noshopcovenantprohibitsthetarget companyfrom once theyhaveagreedtobeacquiredbytheacquiringcompany. A aimed atpreventingtarget companiesfromseekingotherbuyers “No shop”covenantsarecommoninmerger agreementsandare 6.2 payable bythebuyerifregulatoryapprovalsarenotobtained. acquisition agreementshaveeithernofeeoramoremodest obtain regulatoryapprovalscontinuetobetheexception,andmost degree ofregulatoryuncertainty. Substantialfeesforfailureto reverse terminationfeesandtickingintransactionswithahigh appropriate balanceofrisk-sharingbetweentheparties,including Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM assets? Can thetargetagreetoissuesharesorsellassets? Can thetargetagreenottoshopcompanyorits

judicial scrutiny. consistent withdirectors’ fiduciarydutiesinordertowithstand they shouldbeusedwithcareand foravalue-maximisingpurpose response toquestion6.2)maylimit thecompetitioninanauction, when combinedwitha“noshop” covenantdescribedinthe approval ofatransaction.Because theseprovisions(particularly provisions, andshouldbedisclosed toshareholderspriortheir provisions arefrequentlyreferredtoas“don’t ask,don’t waive” provision withanyotherbidders. These merger agreement restricting thetarget from waivingoramendingthestandstill auction process,themerger agreementmayincludeaprovision the target boardtowaiveor amend thestandstill.Particularlyinan often restrictabidderfrommakinganypublicorprivaterequestto not resultinaconsensualtransaction. These standstillprovisions between thetarget company andthepotentialacquiringcompanydo provision” topreventanunsolicitedapproachifnegotiations agreements forapubliccompanytarget oftenincludea“standstill As describedintheresponsetoquestion3.2,non-disclosure exercise priceoftheoptionandcompetingbid. of acompetingbid,atpriceequaltothedifference betweenthe acquirer hastherighttoputstockoptionsellerinevent process. A variationonthestockoptioniscashput,inwhich be invalidatedifusedtoprecludeorprematurelyendthebidding transaction wasannounced. These agreements,however, willlikely company atapriceequaltothetradingondaybefore an optiontopurchase19.9%oftheoutstandingsharestarget typical stockoptionagreementwithatarget companyprovidesfor the bidder’s righttoacquiresharesofthetarget company. The may enterintoastockoptionagreementwiththebiddertosecure offer, thetarget companyorcertaintarget companyshareholders agreements bytarget shareholderstotendertheirsharesintoan Although lesscommonthanshareholdervotingagreementsor provision tobecoerciveandpreclusive. combination ofsuchavotingagreementandforcethevote standard describedbelowintheresponsetoquestion8.2find court tobeimpermissible. The courtappliedtheenhancedscrutiny board withdrawsitsrecommendation)wasfoundbyaDelaware be convenedtovoteonthetransactioneveniftarget company requirement inthemerger agreementthattheshareholdermeeting shareholder combinedwitha“forcethevote”provision( Delaware law. Forexample,avotingagreementfrommajority Arrangements thattotallylockupatransactionareprohibitedunder institutions). where thereareoneormorelarge shareholders(otherthan shares intotheoffer. Suchagreementsarecommoninsituations tender/exchange offer inwhichshareholdersagreetotendertheir may alsoenterintoarrangementswithanacquirerina and againstacompetingtransaction. Target company shareholders irrevocable proxytovotetheirsharesinfavourofthetransaction competing transaction,ormaygranttheacquiringcompanyan shareholders agreetovoteinfavourofthetransactionandagainsta voting agreementwiththeacquiringcompanyinwhichsuch In amerger, certaintarget companyshareholdersmayenterintoa 6.4 the bestvaluereasonablyavailabletoshareholders. devices mustnotprecludethetarget companyboardfromobtaining In transactionsinvolvingachangeincontrol,dealprotection bid. are areasonableresponsetotheperceivedthreatofaninterloping deal protectiondevicesimplementedbythetarget companyboard interests ofthetarget companyanditsshareholders,thatthe What commitmentsareavailabletotieupadeal? ICLG TO: MERGERS &ACQUISITIONS 2019 USA i.e., a

are partofthemerger consideration). cases, theacquiringcompany(ifcompany’s securities business orfinancialconditionofthetarget companyand,insome approvals, andtheabsenceofamaterialadverseeffect onthe number ofnewsharesarebeingissued),receiptregulatory approval oftheacquiringcompanyshareholders(ifasufficient often includeapprovalbythetarget companyshareholders, offer moresusceptibletoaninterlopingbid.Inamerger, conditions conditionality maydecreasethecredibilityofoffer andmakethe related transactions,maybeimposedbythebidder;however, such conditions, suchasafinancingconditionorcompletionofother cannot besubjecttothediscretionofbidder. Additional objective, andanydeterminationwithrespecttotheirsatisfaction target company. Conditionstoatender/exchangeoffer mustbe material adversechangeinthebusinessorfinancialconditionof regulatory approvals,andinmanysituations,theabsenceofa tendering ofaminimumnumbersharesandthereceipt commitment toacceptsharestenderedisusuallyconditionedonthe objective conditions.Inatenderoffer orexchangeoffer, the tender/exchange offer subjecttothesatisfactionorwaiverof consummation ofamerger, andabiddermaymakeits The partieshavewidelatitudetoimposeconditionalityonthe 7.1 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 United Statesantitrustlaws. company priortotheclosing,and maythereforebeinviolationof 7.2) maybedeemedastransferring controltotheacquiring conduct” covenants(asdescribed above intheresponsetoquestion offer ortheeffectiveness ofamerger. Overlyrestrictive “courseof coordinating competitiveactivities priortotheconsummationofan parties fromimplementingintegrationplansorotherwise In general,antitrustlawsintheUnitedStatesprohibitmerging 7.3 business intheordinarycoursebetweensigningandclosing. include covenantsthatobligatethetarget companytooperateits In anegotiatedtransaction,themerger agreementwillgenerally 7.2 company, andtoavoiditsobligationcloseonthatbasis. has occurredonthebusinessorfinancialconditionoftarget remains difficult forabuyer toprovethatamaterialadverseeffect merger agreement. As discussed inresponsetoquestion4.4,it conditions totheoffer will generallymirrortheconditionsin will notberequiredtoclose.Inatenderoffer orexchangeoffer, the agreement issignedbutpriortotheclosing,acquiringcompany financial conditionofthetarget companyafterthemerger condition. Ifthereisamaterialadverseeffect onthebusinessor The merger agreementmayalsoincludeamaterialadverseeffect acquiring companywillnotbeobligatedtoclosetheacquisition. materially complywiththe“courseofconduct”covenantsthen agreement willgenerallyprovidethatifthetarget companyfailsto without thepriorconsentofacquiringcompany. The merger forth intheagreement,maynotbetakenbytarget company Actions outsideoftheordinarycourse,includingspecificactionsset 7 during theprocess? invocation restricted? Bidder Protection What dealconditionsarepermittedandistheir When doescontrolpasstothebidder? What controldoesthebidderhaveovertarget

the contextofahostiletransaction. bidder mayhaveinobtainingcontrolofthetarget companyboardin The responsetoquestion7.4discussesadditionaldifficulties a shareholders, with nomerger agreement). provides (andhostilebidsaregenerally madebyabidderdirectlyto short-form mergers areonlyavailableifthemerger agreementso described aboveinthefirstparagraph ofthisresponsebecausesuch accomplish ashort-formmerger atthelowerownershiplevels target company. Itisalsounlikely thatahostilebiddercan merger) alsorequirestheapprovalofboarddirectors the not waivedits“poisonpill”),sinceamerger (otherthanashort-form to question8.2,willnotoccurifatarget companyhasadoptedand tender orexchangeoffer (which, asdiscussedbelowintheresponse has obtainedamajorityofthetarget companyvotingsharesina obtain completecontrolofthetarget company, evenifsuchbidder In ahostiletransaction,itmaybemoredifficult forthebidderto the target company. and, accordingly, theacquiringcompanywillhave100%controlof receive themerger consideration (subjecttoappraisalrights,ifany) held bytheacquirerwillbecancelledandrepresentonlyrightto At theeffective timeofthe merger, alltarget companysharesnot significantly. outstanding target shares,theuseoftop-upoptionshasdecreased tender offers inwhichthebidderownslessthan90%of However, given theavailabilityofshort-formmergers following ownership percentagenecessarytocompleteashort-formmerger. purchase additionalsharesfromthetarget companytogetthe option”, whichallowsanacquirerthathascompletedoffer to following thecompletionofatenderoffer) mayincludea“top-up the offer. Two-step merger agreements(providingforamerger a majorityoftheoutstandingshares)followingcompletion owns asufficient numberofsharestoapprovethemerger (typically certain circumstances,theuseofashort-formmerger ifthebidder the survivingcompanyisincorporated.Delawarepermits,in certificate ofmerger withthesecretaryofstateinwhich offer withoutavoteofthetarget companyshareholders byfilinga effected bythebidderpromptlyfollowingconsummationof the sharesoftarget company, thenashort-formmerger canbe following thecompletionofanoffer, abidderownsatleast90%of Depending onthestateofincorporationtarget company, if generally takestwotothreemonths. mailed tothetarget company’s shareholders,aprocessthat require thataproxystatementbeprepared,clearedwiththeSECand merger toobtain100%controlofthetarget company. This will merger isnotavailable,thenthebidderwilleffect along-form tender offer inthecircumstancesdescribedbelow. Ifashort-form remaining target companysharesfollowingthecompletionofa permit thebiddertousea“short-formmerger” toacquirethe shareholders, unlessthepartiesagreeinmerger agreementto only beaccomplishedthroughavoteofthetarget company company followingthecompletionofoffer, thenthemerger can Delaware), ifabidderownsfewerthan90%oftheshares company’s certificateofincorporation.)Inmoststates(including on thestateofincorporationtarget companyandthetarget question 2.15,shareholderapprovalrequirementsvarydepending subsidiary withthetarget company. (Asindicatedintheresponseto interests inthetarget companybymerging theacquisition completion oftheoffer, thebidderwillacquireallofequity shares throughatenderoffer orexchangeoffer, thenfollowing Generally, ifthebidderobtainsamajorityoftarget company’s 7.4 How canthebidderget100%control? WWW.ICLG.COM USA

423 USA 424 USA authority towithdrawtherightsplan withoutshareholderapproval, approved bythetarget companyboard. The target boardhasthe unless theacquisitionoftarget companysharesbythebuyer is (usually theacquisitionof15% thetarget company’s shares), target companysharesupontheoccurrenceofatriggering event plans generallyprovideforthedilution ofanunsolicitedbuyer’s to negotiatewiththetarget companyboard.Shareholderrights tactics andencouragethirdpartiesattemptingtoacquireacompany “poison pills”. These plans are designedtodetercoercivetakeover Some U.S.companieshaveimplementedshareholderrightsplansor reasonableness. neither preclusivenorcoerciveandiswithintherangeof satisfied byashowingthatthedirectors’ defensiveresponseis good faithandreasonableinvestigation. The secondelementis to thethreatposed. The first elementissatisfiedbyashowingof existed; and(2)thedefensivemeasureswerereasonableinrelation grounds tobelievethatathreatcorporatepolicyandeffectiveness burden onthedirectorstoshowthat:(1)theyhadreasonable action inresponse,theDelawarecourtshaveimposedaninitial of controlispresentedandthetarget companytakesdefensive scrutiny” ofthecourts.Incircumstanceswhereathreatenedchange target companyboard,however, willbesubjecttothe“enhanced may takereasonablestepstoresisthostilebids;theactionsof The Delawarecourtshaveestablishedthattarget companydirectors 8.2 which createdsuchanobligation. trigger disclosureobligations,assumingnocircumstancesexist the target companyandapotentialacquiringshouldnot As discussedintheresponsetoquestion4.2,discussionsbetween obligation tonegotiatewiththethirdpartyordiscloseproposal. company anditsshareholderstosellthecompany, thereisno company boarddecidesthatitisnotinthebestinterestsoftarget the bestinterestsofcompanyanditsshareholders.Iftarget of anybonafide the target companyshouldcarefullyevaluateingoodfaiththeterms shareholders ifanoffer isreceived.Managementandtheboardof There isnoobligationforthetarget companyboardtoinformits 8.1 company’s certificateofincorporation. state anti-takeoverstatutesandprovisionsinthetarget approval ofthetarget companyboardaregenerallyexemptunder for aperiodoftimeaftertheoffer. Transactions thatreceiveprior acquiring securitiesnottenderedintotheoffer orvotingsuchshares certificate ofincorporation,thebiddermaybeprecludedfrom statutes andanti-takeoverprovisionsinthetarget company’s In addition,dependingontheapplicabilityofstateanti-takeover exchange offer.) change ofcontrolhaspassedtoabidderintenderoffer or however, target companydirectorsoftenagreetoresignonce board membersandobtainingcontroloftheboard.(Inpractice, until theexpirationoftheirrespectivetermsbeforereplacingany thus cannotberemovedwithoutcause),thebidderwillhavetowait if thetarget companyboardmembershavestaggeredterms(and While mostcompanieshaveeliminatedstaggeredboardstructures, Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM 8 discussions? Target Defences What canthetargetdotoresistchangeofcontrol? Does theboardoftargethavetopublicise unsolicitedproposaltodetermineiftheoffer isin

8.3 company ifitsinitialoffer isunsuccessful. A bidderisnotprohibitedfrommaking anewoffer forthetarget 9.2 target company’s stockhasbeen underperforming. board toinfluencethetarget company’s strategy, particularlyifthe activists maybemorelikelytoapplypressureatarget company “activists” initsshareholderbasemaybemorelikelytosucceed,as likelihood ofsuccessanoffer. A bidfor atarget companywith base isalsoanimportantfactortoconsiderinassessingthe only tocustomaryconditions. The compositionoftheshareholder a substantialpremiumtothemarketpriceandifoffer issubject An offer hasthehighestlikelihood ofsuccessiftheoffer priceisat 9.1 board determinesingoodfaiththatitisfurtheranceoftheeffort “Tilting thelevelplayingfield”maybeallowed,butonlyif will likelyplaceevengreaterscrutinyonthefairnessofprocess. insiders areparticipatinginoneormorebuyinggroups),thecourts target companyisseekingotherbuyers(particularlyif is madeinthefaceofanunsolicitedacquisitionproposal,and value reasonablyavailabletotheshareholders.Ifsaledecision directors mustseektoachievethetransactionthatpresentsbest target company, thentheDelawarecourtshaveconcludedthat the target companyboardreachesadecisiontopursuesaleofthe obtaining thebestvaluereasonablyavailabletoshareholders.Once protection devicesmaynotprecludethetarget companyfrom As describedabove,inachangeofcontroltransaction,deal

the lastdecade,andtodayfewerthan5%of The numberofcompanieswithpoisonpillshassteadilydeclinedin adopted solelytoprotectacompany’s “corporateculture”. “ownership change”)andrescindingashareholderrightsplan which maybelimitedorimpairedifacompanyexperiencesan corporate assetssuchasnetoperatinglosscarry-forwards(theuseof confirming theuseofapoisonpillincontextprotecting rights plansinDelawarehaveledtomixedresults,withthecourt poison pilltosuchtransaction.Courtchallengesshareholder negotiated merger agreement,itagreestowaiveapplicabilityofthe better termswiththebidder. When atarget companyentersintoa company boardtimetoconsideralternativetransactionsornegotiate offer fortheentiretarget company, butrathergivethetarget acquirer. Shareholderrightsplansarenotdesignedtopreventafair giving theboardtremendousbargaining powerwithahostile to achievethebesttransactionreasonablyavailablefor plan toaddressaspecificthreat. plan, buttowaituntilcircumstanceswarranttheadoptionofsucha approach isnottoadoptorrenewanexpiringshareholderrights approval. Mostlarge companieshaveconcludedthatthebest board ofdirectorswithoutbeingsubmittedtoshareholdersfortheir strongly opposedtopoisonpillsthatareadoptedbyacompany’s institutional investorsandcertainadvisoryserviceswhoare maintain ashareholderrightsplan. This trendisareactionto 9 acquisition? Other UsefulFacts Is itafairfight? What happensifitfails? What arethemajorinfluencesonsuccessofan ICLG TO: MERGERS &ACQUISITIONS 2019 Fortune 500companies shareholders USA

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in theUnitedStatesandabroad. between theUnitedStatesandChinapoliticalenvironment markets, tighteningintheleveragedloanmarket,tradetensions buyers reactedtohigherinterestrates,increasedvolatilityinequity Deal-making slowedsomewhatinthesecondhalfofyear, as corporate boardsandmanagementtogrowrevenueearnings. of financingonattractiveterms,andthecontinueddesire 2018, withactivitydrivenbylowcorporatetaxrates,theavailability Conditions inthedeal-makingenvironmentwerefavourable 24% ofdealvolume. energy andpowersectorledtheU.S.market,accountingfornearly activity. The volumeofM&A transactionsinvolvingU.S.targets opportunities toenhancetheirdigitalstrategythroughM&A an importantdriveracrossallsectors,asacquirerslookedfor and keepupwithindustrytrends.Inparticular, technologyhasbeen as companiesengagedinM&A activitytoincreasecompetitiveness Many ofthetransactionsannouncedin2018weretransformational, 10.1 Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London ICLG TO: MERGERS &ACQUISITIONS 2019 32% comparedtothelevelofactivityexperiencedi was approximately$1.7trillionin2018,anincreaseof 10 practices inM&A inyourjurisdiction. Please provideasummaryofanyrelevantnewlawor Updates n 2017. The

Transactions involvingChinesepurchasersdeclineddramaticallyin structures. the relativetaxbenefitsandcostsofcertaintypesacquisitions largely unchanged,thenewtaxlawchangescalculusregarding deferred foreignincome. Although mostM&A taxrulesremain subsidiaries ofU.S.parentcompanies,andatransitiontaxon exemption systemforforeign-sourcedearningsofforeign depreciable property, newlimitsoninterestdeductibility, adividend lower corporatetaxrates,100%depreciationoncertaintangible enacted intheUnitedStatessince1986. The newprovisionsinclude and Jobs Act”, whichisthemostcomprehensivetaxlegislation In December2017,President Trump signedintolawthe“Tax Cuts and potentiallylengthyCFIUSinvestigations. parties. All cross-borderinvestorsshouldbepreparedforthorough consequences fortransactionsbetweendomesticandforeign the UnitedStates. The legislationisexpectedtohavefar-reaching statute governingnationalsecurityreviewsofforeigninvestmentin earlier, FIRMA wasenactedin2018,updatingandstrengtheningthe Chinese buyersandtheeffects ofgeopoliticaltensions. As noted on outboundinvestment,CFIUSscrutinyoftransactions 2018 frompreviousyears,reflectingChinesegovernment WWW.ICLG.COM restrictions involving USA

425 USA 426 USA Skadden, Arps,Slate,Meagher&FlomLLP © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London WWW.ICLG.COM financial servicescompanies. insuranceand represented numerousgovernments,manyofthelargestbanks,includingvirtuallyallleadinginvestmentandmajor and ColfaxCorporationinthesaleofitsfluid-handlingbusiness. Friedman; CineworldplcinitsacquisitionofRegalEntertainmentInc.; Development Inc.initssaleto The CarlyleGroupandHellman& acquisition oftheLizClaibornebusiness;PharmaceuticalProduct Cable’s acquisitionbyCharterCommunications;J.C.Penneyinits independent directorsof Time Warner Cable,Inc.in Time Warner Marketing, andtheacquisitionofQualityDistribution,Inc.; business, theacquisitionandsubsequentsaleof Advantage Salesand acquisition ofamajorityinterestin Accenture’s insurancesoftware including theacquisitionofECiSoftwarefrom The CarlyleGroup,the Stebbins hasrepresented: Apax Partnersinnumeroustransactions, financial sponsors,targetsandadvisers.Forexample,Ms. involved inavarietyoftransactionsrepresentingstrategicacquirers, concentrating onmergersandacquisitions.Ms.Stebbinshasbeen Ann BethStebbinsisapartnerinSkadden’s New York office, Skadden has provided a wide array of legal services to the corporate, industrial, financial and governmental communities around theworld.W Skadden hasprovidedawidearrayoflegalservicestothecorporate,industrial,financialandgovernmentalcommunitiesaround strategically positionedoffices acrossEurope,theU.S.and more than60years, Asia allowusproximitytoourclientsandtheiroperations.For Skadden isoneoftheworld’slocations. Our leadinglawfirms,servingclientsineverymajorfinancialcentrewithover1,700lawyers22 URL: Email: Fax: Tel: USA New York, NY 10036 Four TimesSquare Skadden, Arps, Slate,Meagher&FlomLLP Ann BethStebbins www.skadden.com [email protected] +1 9177772660 +1 2127352660

Skyterra, Tyco andXMSatelliteRadio,amongothers. Cablevision, Clearwire,FootLocker, GenesisHealthCare,MetroPCS, involved intransactionsorproposedinvolving Aviall, 78% staketoSoftBankCorporationofJapan.Inaddition,hehasbeen corporate governancematters.HerepresentedSprintinitssaleofa reorganisation matters,specialcommittees,proxyfightsandother hostile transactions,leveragedbuy-outs,bankruptcyand acquisitions arenasince1981,andhassignificantexperiencein practices andoffices. Mr. Kennedyhaspractisedinthemergersand management andclientcommunicationsprogrammesacross for thefirm,leadingSkadden’s thoughtleadership,knowledge industries. Mr. KennedyservesasglobalheadofKnowledgeStrategy emphasis onthetelecommunications,mediaandtechnology concentrates onmergers,acquisitionsandothertransactions,withan Thomas H.KennedyisapartnerinSkadden’s New York office. He ICLG TO: MERGERS &ACQUISITIONS 2019 URL: Email: Fax: Tel: USA New York, NY 10036 Four TimesSquare Skadden, Arps, Slate,Meagher&FlomLLP Thomas H.Kennedy www.skadden.com [email protected] +1 9177772526 +1 2127352526 e have USA

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