preparing your company for sale: legal perspectives
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Varsity CEO Summit Preparing Your Company For Sale: Legal Perspectives
Michael Umansky, Partner, Corporate
Securities & M&A Group, Sheppard Mullin
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Everyone Needs a Plan
So Many Choices
• Public offerings • Minority equity recapitalizations (Appendix A) • Majority equity recapitalizations (Appendix B) • Employee stock ownership plans (ESOPs) • Leveraged buy-outs • Subordinated debt recapitalizations (“mezzanine
financing”) • Senior debt recapitalizations • Acquisition by a strategic partner (Appendix C)
Tax and Estate Planning
• Structure ownership to avoid double taxation
• Understand deal type
• Understand the outlook for estate taxes
Simplify Corporate Structure
• Eliminate unnecessary corporate entities
• Separate personal expenses and assets
• Consider moving assets that don’t enhance corporate value
Obtain Audited Financials
• Broadens range of potential acquirers
• Lends credibility to the "story"
• Enhances predictability of future revenues and expenses
• Reduces risk of costly renegotiations and indemnification claims
Organize Company Records
• Annual director, shareholder and special minutes
• Stock records and authorizations of new stock
• Necessary corporate approvals
Remove Barriers to Sale
• Review charter documents regarding approvals, rights of first refusals, etc.
• Ensure adequate number of shares to support financing
Review Material Contracts
• Look for change in control provisions
• Make sure all material contracts are in writing
• Re-negotiate unfavorable provisions or seek new contracts with free assignability
Conduct IP Audit
• Ensure the company owns rights to all employee work product
• Renew license agreements to identify anti-assignment or change in control provisions
Retain Key Employees
• Develop incentive plans to retain key employees/importance of management team
• Identify tax issues implicated in incentive plans
Don’t Fly Solo!
Contact
Michael Umansky Partner Sheppard, Mullin, Richter & Hampton LLP 12275 El Camino Real, Suite 200 San Diego, CA 92130 Phone: 858.720.7470 Email: [email protected]