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    Checklist For Structuring An Acquisition

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    Metz Lewis Brodman Must O'Keefe LLC
    The following checklist sets forth common considerations in structuring a business acquisition. This material should be seen as a starting point for addressing high-level structural issues.

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    Checklist For Structuring An Acquisition

    Uploaded by

    Metz Lewis Brodman Must O'Keefe LLC
    136 views3 pages
    The following checklist sets forth common considerations in structuring a business acquisition. This material should be seen as a starting point for addressing high-level structural issues.

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    Checklist for Structuring an Acquisition

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    The following checklist sets forth common considerations in structuring a business acquisition. This material should be seen as a starting point for addressing high-level structural issues.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    136 views3 pages

    Checklist For Structuring An Acquisition

    Uploaded by

    Metz Lewis Brodman Must O'Keefe LLC
    The following checklist sets forth common considerations in structuring a business acquisition. This material should be seen as a starting point for addressing high-level structural issues.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Metz Lewis Brodman Must O'Keefe LLC

    Checklist for Structuring an Acquisition

    The following checklist sets forth common considerations in structuring a business


    acquisition. This material should be seen as a starting point for addressing high-level structural
    issues.

     Assess the Reason and Rationale for the Acquisition


    o Consider fit with existing operations and synergies
    o Ease of operational integration
    o Market forces, opportunities, threats, and competition
     Acquisition Financing
    o Debt versus equity financing -- consider current debt levels, dilution, etc.
    o Impact on buyer’s existing facilities and lending relationships
     Transaction Structure
    o Stock Sale
    o Asset Sale
    o Merger
     Structural Considerations
    o Stock Sale
     Usually preferred by seller
     Typically simpler and fewer transaction documents
     Seller often enjoys favorable tax treatment
     Contracts and licenses often can be transferred without third-party consents
     All shareholders must be willing (or there must be a mechanism to force all
    shareholders) to sell in order for buyer to acquire entire company
     Buyer is subject to all seller liabilities, except to extent seller indemnifies Buyer
     Buyer generally assumes seller tax basis for assets, unless buyer files an election
    to step up tax basis in assets and buyer pays tax on step up amount (unless seller
    is an S corporation)
     Buyer cannot write off amount paid for stock
     Buyer may be able to make use of tax loss carry-forwards, subject to limitations
    o Asset Sale
     Usually preferred by buyer
     Usually more complex transaction documents
     Third-party consents to assign contracts and licenses will often be needed
     Unanimous shareholder approval is typically not needed -- usually a simple
    majority will suffice
     Buyer is generally able to limit liability to those liabilities it agrees to assume;
    there are significant exceptions (e.g., environmental, ERISA, etc.)
     Less favorable tax treatment for seller
     C corporation versus S corporation considerations
     Allocation of purchase price among assets
    o Merger
     Variant of a stock sale
     Similar considerations as a stock sale
     Can typically be accomplished without unanimous shareholder approval being
    needed
     Purchase Price
    o Fixed price
    o Valuation formula
     Comparable transactions considering metrics such as total enterprise value, sales,
    EBITDA, etc.
     Asset-based valuation
     Discounted cash-flow analysis
     Industry specific valuation
    o Earnout or other contingent payment
    o Determination of valuation (particularly in the case of a formula-based valuation
    and calculation of earnout and contingent payments)
     Procedure
     Dispute Resolution
     Payment Method
    o Cash, debt, equity securities, earnout, or some combination of these
     Representations and Warranties
    o Consider industry specific representations and warranties to include beyond the
    typical clauses
     Indemnification Obligations
    o Limitations
     Time limit
     Dollar threshold of obligation
     Dollar cap on obligation
     Set-offs, insurance benefits, tax benefits
    o Joint liability of shareholders
     Escrow of Portion of Purchase Price for Claims
    o Amount of escrowed funds
    o Timetable for release
     Retention of Key Employees
    o Employment / consulting agreements
     Restrictive Covenants for Shareholders / Company Employees
    o Non-competition
    o Non-solicitation of customers
    o Non-solicitation of employees
    o Confidentiality
    o Invention assignment

    _____________________________
    This document is intended to provide information of general interest and is not intended to offer any legal advice about
    specific situations or problems. Metz Lewis Brodman Must O’Keefe LLC does not intend to create an attorney-client
    relationship by offering this information, and anyone’s review of the information shall not be deemed to create such a
    relationship. You should consult a lawyer if you have a legal matter requiring attention.

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