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What Should Your M&A Attorney be Telling You?

What Should Your M&A Attorney be Telling You?. January 22, 2014 Los Angeles, California Sponsored by Sheppard Mullin Moderator: Will Chuchawat Panelists: Tammy Brandt Matthew Neco. #IHCC12. Discussion Topics. What Does “Market” Really Mean? What’s My Exposure? Let’s Make a Deal

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What Should Your M&A Attorney be Telling You?

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  1. What Should Your M&A Attorney be Telling You? January 22, 2014 Los Angeles, California Sponsored by Sheppard Mullin Moderator: Will Chuchawat Panelists: Tammy Brandt Matthew Neco #IHCC12

  2. Discussion Topics • What Does “Market” Really Mean? • What’s My Exposure? • Let’s Make a Deal • What Non-Legal Issues Should Your Counsel Raise?

  3. What Should Your M&A Attorney be Telling You?

  4. Panelists • Will Chuchawat • Partner, Sheppard Mullin • wchuchawat@smrh.com • Tammy Brandt • General Counsel, Service Mesh • tammy.brandt@servicemesh.com • Matt Neco • General Counsel, Docstoc, Inc. • matt.neco.sbinc@gmail.com

  5. Sheppard Mullin at a Glance • Fast Facts • AmLaw 100 firm founded in Los Angeles in 1927 • 625 attorneys practicing in 15 offices worldwide • Represent most of the Fortune 100 • Firm’s attorneys ranked in Chambers USA, Legal 500,Best Lawyers in America, Which Lawyer PLC, SuperLawyers, etc.

  6. What Does Market Really Mean? • The Studies • ABA • Houlihan • SRS

  7. What Does Market Really Mean? • Be wary with those statistics and those that spout them

  8. What Does Market Really Mean? • A deal looks different if your company looks like this…

  9. What Does Market Really Mean? • versus this

  10. What Does Market Really Mean? • A $500 million deal is different than a $50 million deal

  11. What Does Market Really Mean? • Private equity buyers and strategic buyers are two different animals

  12. What Does Market Really Mean? • Asset deals vs stock deals vs mergers vs recaps vs minority deals vs healthy deals vs distressed deals vs technology deals vs A&D deals vs healthcare deals vs …

  13. What’s My Exposure?

  14. What’s My Exposure?

  15. What’s My Exposure?

  16. What’s My Exposure? • How much exposure for the Seller? • Reps and warranties • Covenants • Retained liabilities • Caps • Baskets • Survival • Third party recovery • Net of taxes • Mitigation • Require maintenance of insurance • Release

  17. What’s My Exposure? • How much exposure (coverage) for the Buyer? • Due diligence • Your watch, our watch • Reps and warranties • Sandbagging • Covenants • Assumed liabilities • Consequential, loss of profit/revenue, multiplier damages • Legal opinion

  18. What’s My Exposure? • Buyer coverage/exposure continued • Non-compete/Non-solicit/Non-disparagement • A/R • Inventory • Fraud • FCPA

  19. What’s My Exposure? • Do I have to close? • arrangement of satisfactory financing • retention • compliance with bulk sales laws • receipt of favorable tax rulings • confirmation of outstanding equity securities • receipt of fairness opinions from investment bankers • title policies for significant real estate • an environmental audit • certain regulatory actions

  20. Let’s Make a Deal

  21. Let’s Make a Deal • Flying Solo

  22. Let’s Make a Deal

  23. Let’s Make a Deal • When (why) do I call my lawyer?

  24. Let’s Make a Deal • When (why) do I call my lawyer? • Planning • Deal team • Banker engagement letters • Exclusivity • Working Capital/Net Assets/Minimum Inventory/Cash • Escrow/Holdback • Promissory notes • Rollover • Earnout • 338(h)(10) • Purchase Price Allocation

  25. Let’s Make a Deal

  26. Let’s Make a Deal • I’m not a banker, but you should talk to one.

  27. Let’s Make a Deal • I’m not an accountant, but you should talk to one.

  28. Let’s Make a Deal • What do I need to do to win the bid? • What do I need to do to close the deal?

  29. Let’s Make a Deal • What type of negotiator are you? • What type of negotiator is your lawyer?

  30. Let’s Make a Deal • What’s really a deal killer?

  31. What Non-Legal Issues Should My Counsel Raise With Me? • Legal issues vs business issues

  32. What Non-Legal Issues Should My Counsel Raise With Me? • What happens if XYZ happens? • Loss of key customers • Loss of key suppliers • Loss of key employees (including the seller) • Litigation • What happens if XYZ does not happen? • Approval of the transaction • Approval needed for the business

  33. What Non-Legal Issues Should My Counsel Raise With Me? • Rep and warranty insurance • Insurance impact • Employment agreements/policies • Benefit plans

  34. What Non-Legal Issues Should My Counsel Raise With Me? • IT • How does this effect your loan covenants? • SEC reporting requirements? • Third party shareholder representative • Escrow provider

  35. Take-Away Points • What’s market depends on the circumstances • It’s not rocket science, it’s a full contact sport • You don’t play contact sports alone • Call your lawyer early on

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