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Corporate Counsel’s Role in Merger Control: Negotiating and Structuring the Deal

Corporate Counsel’s Role in Merger Control: Negotiating and Structuring the Deal . ABA Section of international law / aija Successful Transactions: What In-House Counsel Expect from their M&A and Antitrust Attorneys June 6, 2014 | chicago, IL. Agenda. The Hypothetical

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Corporate Counsel’s Role in Merger Control: Negotiating and Structuring the Deal

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  1. Corporate Counsel’s Role in Merger Control: Negotiating and Structuring the Deal ABA Section of international law / aija Successful Transactions: What In-House Counsel Expect from their M&A and Antitrust Attorneys June 6, 2014 | chicago, IL

  2. Agenda • The Hypothetical • Discussion of Key Issues: • Managing expectations • Multi-jurisdictional filings analysis • Information-sharing in negotiations • Antitrust risk-sharing • Co-operation covenants • Remedies / divestiture analysis • Protecting privileged and key deal terms from disclosure • “Soft” factors in deal dynamics • Questions?

  3. The Hypothetical • Purchaser: Vandelay Industries (smartphone OS) • Target: Kramerica Inc. • Waterproof mobile devices and smartphone OS • Operations in USA, Canada, Germany, Brazil • All-cash offer valuing Kramerica at $10BB • Accelerated closing timetable • Potential horizontal and/or vertical competitive overlaps • Antitrust risk scuttled last attempted takeover of Kramerica; potential third-party complaints now

  4. Managing Expectations • Timing • “This deal needs to close asap” • “Can we get all filings in within five days of signing?” • “Do we have to file in China?” • Risk • “There are no substantive problems, right?” • Resources • “Joe really knows these markets, but he’s tied up with due diligence – can he deal with this later?” • “You want me to calculate market shares for waterproof phones and tablets separately for all EU member states?” • Costs • “$5M for a Second Request???”

  5. Multi-jurisdictional Filings Analysis • > 80 jurisdictions with merger control • Suspensory vs non-suspensory regimes • Impact of outlier jurisdictions on global deal timing • To file or not to file • Strategic consideration of filing when below the notification thresholds • Voluntary notification regimes

  6. Information-Sharing in Negotiations Gun-jumping: thresholds and penalties Types of information appropriate for data rooms Treatment of competitively-sensitive information during the negotiations ECO designations; inclusion of in-house counsel? External counsel’s management of ECO material pre-closing; what to do if the deal fails? Use of clean teams

  7. Antitrust Risk Sharing • Assessing the antitrust deal risk • Are there horizontal or vertical issues? • What are customers going to say? • Bad documents? • Who might complain, and why? • Apportioning antitrust risk between buyer and seller • How much risk can we shift to the other side without destroying the deal? How much are we willing to take? • Contractual options (see next slide) • Parties’ transactional histories

  8. Risk Sharing: Contractual Options • Break fees • Buy-side vs. sell-side • Triggers (Temporal? Financial? Others?) • Remedial obligations • Structural vs. behavioral • Types of divestiture caps • “Hell-or-high-water” provisions

  9. Remedies / Divestiture Analysis • Extent of buyer’s obligation to accept agency remedies: • Commercially reasonable efforts; best efforts; sole discretion to reject • Financial triggers on right to reject • Mix-and-match remedies; buyer’s obligation to divest own assets • Scope for behavioral remedies; duration of same • Up-front remedies vs. post-closing

  10. Co-operation Covenants • Time to file • “Promptly” or within specified number of days? • “Best Efforts” clauses • Communications with antitrust agencies • Advance notice rights • Approval of written submissions • Participation in meetings • Timelines around subpoena or 2nd Request responses

  11. Protecting Privilege And Deal Term Disclosure • Use of JDAs • Scope of filing requirements: side letters, confidential annexes, etc, caught? • Impact of Entire Agreement clauses on same • Scope of privilege protection • Extent of JDA protections • Work product doctrine • Privilege in common law vs. civil law regimes

  12. “Soft” Factors in Deal Dynamics Co-operation between external M&A counsel and antitrust counsel (same firm or different firms) Who is the client? Internal complexity, in-house counsel vs. management Role of external counsel / internal counsel in information-gathering Influence of risk aversion, risk-embracing management, timing constraints, etc. on antitrust counsel’s role

  13. Questions? • Casey Halladay, Partner, McMillan LLP, casey.halladay@mcmillan.ca • Nikiforos Iatrou, Partner, WeirFoulds LLP, niatrou@weirfoulds.com • Michael Kuder, Senior Antitrust Counsel, WESCO Distribution, mkuder@wescodist.com • Alvaro Ramos, Legal Director (Antitrust), Cisco Systems, alvaramo@cisco.com • Hartmut Schneider, Partner, Wilmer Hale LLP, hartmut.schneider@wilmerhale.com • Philipp Werner, Partner, McDermott Will & Emory LLP, pwerner@mwe.com • Ed Wynn, VP, General Counsel & Secretary, Stepan Company, ewynn@stepan.com

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