Riassunto esame Inglese Giuridico, prof. Cadel, libro consigliato Legal English, Di Renzo, Villata

THE BUYER:

Stratecic porpuse: The buyer makes the purchase to consolidate, link or integrate the acquired business with

his own, creating synergies.

Financial Purposes: the buyer makes the purchase to improve and revitalize the acquired business and

eventually sell it at a substantial gain.

THE SELLER:

May sell all or a part of the business to get cash and/or to solidify the relationship with the buyer, staying in

as a majority or minority shareholder.

Common elements between M e A: Both transactions change not only who controls the business, but also

the strategic direction the business will take .One side wants to learn as much as possible a bout the business

and understand it deeply. Both sides try to maximize the value of the deal. Also, the people involved, the key

steps of the processes of both transactions are very similar.

People involved

* THE INVESTORS: they can be buyer or seller:

1) Founders (people who start the business and help from the first steps);

2) Venture capital firms (entities that help promising, early‐stage businesses develop and grow);

3)Private equity firms (entities that provide the company with the human and financial resources);

4)Institutional investors (entities like mutual funds, pension funds etc., that invest with a medium/long term

goal to maximize the value of their portfolio, rather than trying to influence the management of the business.

* THE ADVISORS:

1)Strategic consultants (provide advice on the strategic opportunities of the transaction) 2)Lawyers (every

transaction is a contract or transfer of legal ownership, so you only buy, sell or own what the legal

documentation says you do);

3)Investment Banks (provide advice on the financial structure of the transaction and may also broker the

transaction itself) ;

4)Auditors (certify the seller’s accounting documents and provide advice on how to structure a company

financially, as well as tax and accounting strategies).

* THE OTHERS:

1)Regulators (M&A transactions may be subject to many regulatory requirements (as antitrust regulation or

industry or company‐specific regulation);

2) Customers, public and press (it is important to consider how the customers, the public and the press will

view(and react to)the transaction after its completion);

3) PR firms (may be helpful to influence the opinion that the public and the press will have on the

transaction).

Setting up the deal

Buyer’s side

Setting up the strategy:

• Build a corporate strategy that includes M&A transactions

• Identification of the companies to acquire and/or to merge with.

• The capital structure of the company (equity/debt) must be flexible and adaptable to the market

situation and/or to the structure of the transaction

• Build an in‐house corporate development team in charge to execute the corporate strategy.

• Be ready to hire external advisors at the right time.

• the board of directors. Every transaction must be approved by:

• the corporate development

team

• the in‐house legal department.

• the top management.

• shareholder’ meeting (for mergers)

Need for Secrecy: Information Leakage about a transaction may affect the position of the buyer before the

market, his customers, his competitors and his employees

Need for Publicity: If the transaction involves listed companies, the buyer must comply with the disclosure

duties set forth by the market regulations. Giving public detail about a transaction may have an important

role in the buyer’s PR strategy

Seller’s side

Planning the sale:

- The purpose of the seller is to maximize the price or profit

- Start thinking about the sale well in advance

-Focus on and point out the potential buyers

-Organize the company in order to make it more sellable

-Hire external advisors that help finding a buyer.

-The business must be attractive to potential buyers not only for its profitability, but also its organization

-Analyzing potential buyers means to consider their needs and try to organize the business accordingly

-The business must comply with the potential buyers needs related to employees, technology, products,

customers, financials, public image, market reputation, etc.

Need for Secrecy: Information leakage about a transaction may affect the position of the seller before the

market, his customers, his competitors and his workers. The proper communication of the sale within the

company is a critical issue.

Need for Publicity: If the transaction involves listed companies, the seller must comply with the disclosure

duties set forth by the market regulations. Giving public detail about a transaction may have an important

role in the seller’s pr strategy.

Carry out the deal

Once the preparation for the deal is complete, it is time to propose the transaction

- The approach may be direct or through a proxy (bank or lawyer)

- In the first approach, both sides have to disclose the main topics of the transaction, but not its details.

-The side making the approach needs also to “think ahead” of the other side, anticipating some of his needs

and concerns about the transaction that may arise during the negotiations.

Negotiation: are when the sides come together and try to reach mutually accepted terms for the transaction:

• One‐on‐one Negotiations : One side meets his counterparties one at a time, the negotiating

processes usually fast; Both sides are afraid of putting the transaction at risk.

• Competitive Auction: One side narrows the field of his counterparties examining their proposals

together; The process allows to select the best counterparty with reference to all the terms of the

transaction; The auction leads to a one‐on‐one negotiation with the winner.

DD (due diligence) : In an M&A transaction, the combined entity (buyer)takes over all the assets, the

liabilities, the rights and the obligations of the involved companies (seller).

Those assets, liabilities, rights and obligations need to be identified prior to the completion of the transaction

through the due diligence process. DD is an extensive review of the details of all the activity and the

aspect of the business aimed at getting a clear and accurate view of the business itself. DD applies to

every area that may be relevant to the business. Results of the DD deeply influence the behaviour of the

sides during the negotiations and the terms and conditions of the transaction.

The valuation: The valuation is aimed at setting the price of the transaction. There are many different

valuation methods:

trading comparables (analysis of the stock market prices of companies with similar activities to value listed

companies);

transaction comparables (analysis of the value assigned to similar companies in similar transactions);

discounted cash flows (analysis of the capacity of a business to produce cash in the foreseeable future.

The results of DD:

Control Premium (when a transaction is aimed at acquiring the majority stake of a company, this stake has

a higher value than a small, no controlling stake;

Synergy and integration costs (If the transaction is driven by the creation of synergies or integrations

between the companies involved, their costs must be taken into account with an accurate cost/benefit

analysis );

Future profitability (a business is not only worth for its actual profitability, but even more for the profits it

will yield in the estimated future)

The costs of transaction

The must important is the purchase price, but there are also fees.

The buyer in an acquisition transaction must pay the purchase price to the seller. This payment may be made

in cash, in shares (issued by a capital increase), in other assets or through a combination of payment

methods. When the consideration is to be paid in cash, the buyer borrows mony from other investitors (by

issuing bond) or from banks.

Closing the deal

To complete an acquisition: first comes the signing of the deal, in which the parties execute a binding

agreement to complete the sale subject to certain condition. The parties complete the sake by signing the

documents related to the transfer of ownership of assets and securities and by paying the purchase price.

To complete a merger: you need approval of the relevant corporate bodies (board(Consiglio) of directors and

shareholders’ meeting), the signing and the share exchange.

TOB Takeover bid (or tender offer)

Takeover bid is an acquisition by the offeror or bidder of the majority stakes of the offeree/target company.

Is a public offer made by the bidder to the holders of the securities of a company to acquire all or some of

those securities, whether mandatory or voluntary, which has as its objective taking control of the target

company.

Mandatory TOB: a tob launched pursuant to the relevant provision of law

Voluntary TOB: a tob launched as a part of M&A strategy

Whether a tob is voluntary or mandatory the rules governing the tob procedure are basically the same.

Tob are regulated differently from one country to another.

On April 2004 the EC Directive 25 was passed with the goal of:

1) harmonising all the different Tob regulations of the UE countries,

2) creating UE-wide clarity and transparency about legal issues to be settled in the event of tob;

3) protecting the holders of securities in particular those with minority holdings, when control of their

companies has bee acquired. Such protection is ensured by obliging the person who has acquired control of a

company to make an offer to all the holders of that company’s securities for all their holdings at an equitable

price.

Regarding mandatory tob, the basic rule is that whoever, as a result of one or more purchase, has acquired

more than a given threshold of the voting securities of a listed company, is obliged to make a mandatory bid

on all the remaining voting securities of that company.

The relevant threshold differs from one country to another. The applicable threshold, only voting shares, are

relevant for purpose of the mandatory tob. A mandatory tob must be made at an equitable price that is at the

highest price paid for the same securities by the offeror over not less than six months and not more than

twelve months before the bid.

After this, the offeror or any person acting in concert with him or her buys securities at a price higher than

the offer price, the offeror has to increase the offer to match that price.

Under the EC directive, the infringement of the mandatory tob rules carries two types of sanctions: 1] a fine

and 2] the supervision of the voting rights attached to the securities already owned by the aspirant offeror.

The offeror may acquire securities by paying cash with other securities or a combination of both.

To ensure that the offeree's shareholders make an informed assessment of the takeover bid, the offeror has to

write and make public an offer document containing all the information, such as the identity of the offeror,

the terms of the bids, the consideration offered, all the conditions of the bid, time for acceptance of the tob,