m&a for in-house counsel...

© Copyright 2016 Saul Ewing LLP

M&A for In-House Counsel Generalists

Presenters: Aref Wardak, Senior Corporate Counsel, MuleSoft, Inc. Adam F. Kelson, Partner, Saul Ewing LLP Matthew S. Draper, Special Counsel, Saul Ewing, LLP


Getting Started- NDA •  General Purpose: protect confidential

information disclosed by selling party/target in connection with negotiations/due diligence

•  Confidential information to be used only in connection with exploring transaction

•  Executing an NDA does not mean you are required to disclose anything §  Consider timing of full access


Getting Started - NDA •  When should confidentiality obligation expire?

§  2 or 3 years? ●  Information disclosed in acquisition context becomes stale

§  Perpetual? ●  Receiving party should never be able to use information

acquired in connection with a busted deal


Getting Started - LOI •  General Purpose: outlines material terms of

transaction to minimize subsequent negotiation on key points

•  LOI’s are not seen in every deal, but are typical


Getting Started - LOI •  Key terms typically addressed:

§  Confidentiality (especially if no NDA in place) §  Exclusivity

●  Are the parties agreeing to forego other offers? §  Binding effect (which provisions or binding)

●  Are the parties committing to do a deal? ●  Break up fee/reverse break up fee

§  Expenses §  Governing law



§  Structure (type of deal) §  Transaction consideration

●  Cash, equity, debt (or some combination) ●  Earn-out ●  Valuation assumptions ●  Financing contingency? ●  Escrow for indemnification?



§  Due diligence process ●  Timetable ●  Data room? ●  Customer references?



§  Conditions to closing ●  Satisfactory due diligence ●  Receipt of consents ●  Negotiation of ancillary agreements ●  Financing?


Getting Started - LOI §  As a Seller, things will never get better than

the LOI! ●  Buyers look for reasons to negotiate price and

terms downward ▪  Due diligence results ▪  Review of disclosure schedules ▪  Market conditions

●  Sellers need to understand that the LOI terms are the best possible deal – likely will come in slightly lower on terms/price


What Kind of Deal Are you Doing The general rule: •  Buyers prefer to buy assets •  Sellers prefer to sell stock

§  Price may change depending upon tax benefits available in connection with chosen structure


What Kind of Deal Are You Doing? •  Stock

§  Pros: ●  Buyer acquires entire operating entity ●  Typically fewer consent issues ●  Seller (absent additional agreement) is done with business ●  Seller can receive capital gains treatment on sale ●  Documentation tends to be more straightforward

§  Cons: ●  No ability to leave behind legacy issues

▪  Environmental ▪  Labor ▪  Litigation

●  Potential for hold-outs by stockholders


What Kind of Deal Are You Doing? •  Asset

§  Pros: ●  Buyer is able to acquire selected assets and assume certain

liabilities ●  Limits buyer’s exposure ●  Allows for purchase price allocation/potential favorable tax

treatment for buyer §  Cons:

●  Requires third party consent to assignment ●  Requires determination of which assets are being purchased ●  Can require post-closing transition services arrangement ●  C-corp – double taxation


What Kind of Deal Are You Doing? •  Merger

§  Pros: ●  Similar to a stock deal, but approval threshold is

generally lower §  Cons:

●  Same as stock deal ●  Administrative requirements – letters of

transmittal, etc. ●  State filings required


After a Signed LOI •  Buyer will likely begin due diligence

§  Light diligence may have occurred pre-LOI •  Onsite •  Data room

§  Far more typical §  Consider data room maintenance obligations

(bankers, sellers, etc.)


How In House Counsel Can Add Value – LOI

•  Contribute to the go/no go conversation and be able to speak intelligently about the value proposition behind the deal and how that affects deal structure and purchase agreement.


How In House Counsel Can Add Value – Diligence

•  Seller:

§  Have the dataroom ready to go ASAP after NDA is signed.

§  Organize dataroom in a clear and ordered fashion.

§  Present issues (and solutions) rather than waiting for Buyer’s counsel to find them.


How In House Counsel Can Add Value

– Diligence •  Buyer:

§  Provide streamlined diligence request list. §  Take ownership of diligence process.

●  Create and maintain diligence tracking spreadsheet and own it.

●  Triage diligence matters in all areas, not just yours. ●  Drive issues to resolution on both sides (follow up,

follow up, and follow up).


After a Signed LOI •  Parties will begin to negotiate purchase

agreement §  Things to focus on

●  Adjustments to purchase price ●  Representations and warranties ●  Covenants ●  Indemnification


Purchase Agreement •  Representations and Warranties

§  Buyer’s main source of comfort regarding its acquisition

§  Seller tells Buyer about what it is actually buying §  Should work to confirm due diligence and valuation

assumptions §  Must be evaluated in tandem with disclosure

schedules


Purchase Agreement •  Covenants

§  Conduct between signing and closing (if applicable) ●  Conduct business in ordinary course ●  No entertaining other bids

§  Conduct post-closing ●  Non-competition/non-solicitation ●  Confidentiality ●  Non-disparagement


Purchase Agreement •  Indemnification

§  Single most negotiated portion of most purchase agreements

§  Provides structure for parties to recoup losses related to rep breaches


Purchase Agreement •  Typically negotiated provision/concepts

§  Caps ●  General reps ●  Fundamental/special reps ●  Overall

§  Baskets ●  Tipping versus deductible

§  Survival ●  General survival ●  Fundamental/special reps ●  Covenants

§  Escrow (amount, timing, uses)


How In House Counsel Can Add Value – Overall

•  Stay on top of less glamorous parts (e.g. dataroom, definitions, and cross references)

•  Be the intermediary on the deal §  Explain deal and translate legalese to rest of

team §  Provide guidance/planning so team isn’t

surprised


How In House Counsel Can Add Value – Overall

•  Drive process §  Over Communicate §  Develop timeline, assign tasks, and follow up,

follow up, follow up. •  Celebrate closings and show gratitude to

the deal team.


Speaker Biographies Aref Wardak is a Senior Corporate Counsel at MuleSoft, Inc., an enterprise software company located in San Francisco that enables businesses to unlock the full potential of their applications and data through API-led connectivity, both on-premises and in the cloud. Aref focuses primarily on corporate governance, securities, IP, and business development matters. Aref started his legal career as a corporate associate in the Palo Alto office of Wilson, Sonsini, Goodrich & Rosati, where his practice consisted of M&A and general corporate matters for public and private technology companies.

Aref Wardak Senior Corporate

Counsel MuleSoft, Inc.


Speaker Biographies Adam Kelson represents businesses and entrepreneurs in numerous commercial, corporate and financial transactions, both nationally and internationally. He has represented investors, businesses and management in transactional matters, including mergers and acquisitions, joint ventures, recapitalizations and equity and debt securities offerings. Adam counsels entrepreneurs and emerging growth companies throughout the lifecycle of their businesses, including formation and start-up, corporate and business counseling, capital raising transactions and commercial relationships. His experience spans a variety of industries, from core manufacturing to service industries and high-tech. Adam represents borrowers, banks and private lenders in secured and unsecured financing transactions, including asset based loan transactions, receivables facilities, factoring transactions, equipment leases and project finance. In addition, Adam represents investment managers in the structuring and formation of onshore and offshore private investment funds and structured financial products.

Adam F. Kelson Partner Saul Ewing LLP


Speaker Biographies Matt Draper is a corporate lawyer who focuses his practice on mergers, acquisitions, and other general commercial and corporate matters. He has represented private equity sponsors and their portfolio companies, public and private companies, and entrepreneurs in a variety of transactional matters. Matt works closely with clients and their management teams to negotiate and draft complex acquisition and commercial agreements. Matt also has significant experience advising clients on debt and equity financings, venture capital investments, and other general corporate matters. Prior to joining Saul Ewing in 2013, Matt was associated with the law firms of LeBoeuf, Lamb, Greene & MacRae LLP, and Morgan, Lewis & Bockius LLP.

Matthew S. Draper Special Counsel Saul Ewing LLP


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