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Practice Pointers

The Locked Box – Unlocked

By now, probably everyone that works in M&A or private equity has heard of the concept of a locked box as an alternative to completion accounts (or, in the U.S., “closing accounts”) on a deal. The locked box structure replaces the traditional “completion accounts” mechanism, with its cumbersome process of preparing and agreeing accounts as at the actual completion date and making consideration adjustment payments to reflect any surplus or deficit in the chosen financial metrics, with one where the...

Practice Pointers

January 2023 Semi-Annual M&A Update

On January 25, Dorsey attorneys, Brian Burke, Amelia Messa and Jonathan Van Horn presented a review of corporate, alternative entity and antitrust law developments of interest to the M&A practitioner, including the latest Delaware court decisions. Highlights from this presentation include discussion on appraisal rights, fraud, SPACs, non-competition agreements, choice of law, change in control provisions and personal jurisdiction. Watch the presentation here.

Legal Developments

Increase in HSR Reportability Thresholds and Other HSR Developments

In January 2023, the Federal Trade Commission (FTC) made three important announcements for M&A practitioners. First, on January 23, the FTC announced the annual adjustment of the thresholds that trigger premerger reporting obligations under the Hart-Scott-Rodino (HSR) Act. The new thresholds will apply to transactions closing thirty days after publication of the announcement in the Federal Register (that is, not earlier than February 24, 2023). Second, the FTC announced the annual adjustment for maximum daily civil penalties for noncompliance with...

Practice Pointers

2023 Private Funds Compliance Calendar

Dorsey has recently published a 2023 Private Funds Compliance Calendar. The calendar includes obligations and deadlines that could potentially apply to an SEC-registered investment adviser, or CFTC-registered commodity pool operator, or a commodity trading advisor that advises private funds. The calendar is available here.

Legal Developments

FinCEN Regulations: BSA’s Revised Beneficial Ownership Requirements

The Financial Crimes Enforcement Network (“FinCEN”) issued final regulations in 2022 to implement the revised “beneficial ownership information” disclosure rules for legal entities (the “Final Rule”) under the Corporate Transparency Act (“CTA”), which is part of the comprehensive revisions to U.S. anti-money laundering statutes included in the Defense Appropriations Act of 2021. Specifically, the Final Rule implements Section 6403 of the CTA and requires reporting companies, including a range of U.S. legal entities and non-U.S. legal entities registered to do...

Legal Developments

Heard at the IBA 2022 Annual Conference

Maintaining international connections, and building new ones, Dorsey attended the recent International Bar Association Annual Conference in Miami. Some of the key themes, from both the hallways and the many seminars and formal events, are published here.

Practice Pointers

Transition Service Agreements (TSA): Understanding the Key Considerations

Often, when a buyer purchases a specific business unit of a company, complexities arise for both buyer and seller as the business unit being sold frequently depends upon several services provided by the seller. At the time of closing, the buyer may not have the infrastructure, resources, or functionality to initially support these services. Transition services agreements (“TSAs”, for short) are effective tools in addressing these issues and can help ensure a smooth transition during the divestiture. A TSA is...

Practice Pointers

Hell-or-High-Water Clauses in Uncertain Regulatory Times

In a deal market as uncertain as this one, we have seen transactional lawyers more frequently resorting to pushing what are known as “hell or high water” clauses—clauses that obligate parties to take “any and all actions necessary” to achieve some stated goal. Most frequently these clauses are seen in the context of complying with antitrust laws and obtaining necessary regulatory approvals. As antitrust matters take the spotlight in a number of cases, especially given the Department of Justice’s and...

Legal Developments

Consideration of Evolving National Security Risks by CFIUS

On September 15, 2022, President Biden issued Executive Order 14083 (“EO 14083”) which the White House describes as a “first-ever presidential directive defining additional national security factors for CFIUS to consider in evaluating transactions.” Rumors of its publication have been circulating in Washington, D.C. for months, and for those that follow foreign investment activity in the United States, it is revealing any time the Executive Branch speaks publicly about CFIUS. Click here for a few insights into how EO 14083...

Delaware Law

2022 Delaware Entity Statutory Amendments

On August 1, 2022, the 2022 amendments to Delaware’s entity statutes went into effect. These included amendments to the Delaware General Corporation Law (the “DGCL”), the Delaware Limited Liability Company Act (the “LLC Act”), the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”), the Delaware Revised Uniform Partnership Act (the “DRUPA” and together with the LLC Act and the DRULPA, the “Alt Entity Acts”) and the Delaware Statutory Trust Act (the “DSTA”). Descriptions of some of the more notable amendments...

Practice Pointers

Middle Market M&A Key Deal Terms

A major law firm has completed a survey on trends and deal points in the M&A industry. The survey contains data and trends on many key points the M&A legal practitioner should be aware of as they negotiate M&A transactions, and the findings in the summary mirror our own experience in the market. In general in more recent transactions we have seen a continuing trend lower escrowed indemnity amounts, higher usage of representation and warranty (“R&W”) insurance, and generally more...

Delaware Law

Proposed Statutory Officer Exculpation in Delaware

As we transition into spring, the minds of many corporate attorneys return to the annual updates proposed to the Delaware General Corporate Law (DGCL). If the changes proposed by the Council of Corporation Law Section of the Delaware State Bar Association are adopted (as they usually are), they will become effective on August 1, 2022. A few of this year’s proposed changes are of particular significance to officers of Delaware corporations. As currently enacted, Section 102(b)(7) of the DGCL allows...

Delaware Law

Delaware is a “Pro-Sandbagging” State

While M&A practitioners have long taken the view that Delaware is a “pro-sandbagging” state, a recent case in the Delaware Court of Chancery has added concrete authority to that position. In Arwood v. AW Site Services (March 9, 2022), the Court found that a buyer was entitled to indemnification stemming from the breaches of certain representations, despite that buyer having effectively prepared the financials and other information that were covered by the reps. “Sandbagging” is the buyer-favorable concept that preserves...

Legal Developments

“Everything zen? Everything zen? I don’t think so. . .”¹ – MAE Clauses in the Time of COVID

On March 1, 2022, the Delaware Court of Chancery delivered a memorandum opinion ordering a yoga franchisor to complete the acquisition of its franchisee’s chain of yoga studios. The case arose out of the parties’ pre-COVID asset purchase agreement (“APA”) through which the defendant, CorePower Yoga LLC, was set to acquire various yoga studios owned by the plaintiff, Level 4 Yoga, LLC, for nearly $30 million. Level 4 claimed that CorePower breached the parties’ APA in the early months of...

Legal Developments

Trends in Chinese M&A

Companies involved in M&A and their deal professionals in China and Hong Kong have been navigating a very changed U.S.- China dynamics for the U.S. outbound M&A market in the last few years. Based on increased barriers to entry, including as a result of greater CFIUS scrutiny, there have been fewer outbound M&A transactions from China into America for the last three years. Instead of investments and acquisitions, deal professionals are seeing divestitures becoming the new trend in the U.S....

Legal Developments

HSR Developments

In January 2022, the Federal Trade Commission (FTC) made two important announcements for M&A practitioners. First, on January 24, the FTC announced the annual adjustment of the thresholds that trigger premerger reporting obligations under the Hart-Scott-Rodino (HSR) Act. The new thresholds will apply to transactions closing after February 23, 2022. Second, the FTC announced the annual adjustment for maximum daily civil penalties for noncompliance with the HSR Act’s requirements (failure to file, failure to observe the mandatory waiting period, or...

Cross Border

The UK National Security and Investment Act 2021: A New Regime For Acquisition and Investment Transactions: Update

There have been a number of key developments in the evolution of the UK’s national security regime since our e-bulletin earlier this year (UK to Adopt New Powers Over M&A Activity To Protect National Security). First and foremost, the National Security and Investment Bill has now taken its place on the UK Statute Book as the National Security and Investment Act 2021 (the “Act”). The new legislation is set to come into force on the 4th January 2022. The Act...

Cross Border

U.S. National Security Issues in Cross-Border Food, Beverage & Agribusiness Deals

On October 28, 2021, a bipartisan group of U.S. Senators introduced the Food Security is National Security Act of 2021 (the “Act”). Among other things, the Act would require the Committee on Foreign Investment in the United States (“CFIUS”) to consider the “potential effects of [certain foreign investment transactions] on the security of the food and agriculture systems of the United States, including any effects on the availability of, access to, or safety and quality of food.” In other words, certain foreign...

Legal Developments

FTC Announces New Position on Debt and HSR Valuation

On August 26, the Federal Trade Commission announced a new position on an important factor in determining whether a transaction must be reported under the Hart-Scott-Rodino Act: whether debt repayment at closing counts in determining the value of a transaction. The FTC’s new position is that “the full or partial retirement of debt should be included in calculating the Acquisition Price in any instance where selling shareholder(s) benefit from the retirement of that debt.” An explanation of the FTC’s new...

Legal Developments

Semi-Annual M&A Update

On August 11th , Dorsey presented a review of corporate, alternative entity, and securities law developments of interest to the M&A practitioner, including the latest Delaware decisions. Watch the presentation by Brian Burke, Amelia Messa, and Jonathon Van Horn here.