and acquisitions of a troubled business

347 Pages·2009·1.35 MB·English

M
ERGERS AND
A
CQUISITIONS
A
STEP-BY-STEP LEGAL AND PRACTICAL GUIDE
EDWIN L. MILLER JR.
JOHNWILEY&SONS,INC.

M
ERGERS AND
A
CQUISITIONS

M
ERGERS AND
A
CQUISITIONS
A
STEP-BY-STEP LEGAL AND PRACTICAL GUIDE
EDWIN L. MILLER JR.
JOHNWILEY&SONS,INC.
Thisbookisprintedonacid-freepaper.
Copyright2008byJohnWiley&Sons,Inc.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
WileyBicentennialLogo:RichardJ.Pacifico
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyform
orbyanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptas
permittedunderSection107or108ofthe1976UnitedStatesCopyrightAct,withouteithertheprior
writtenpermissionofthePublisher,orauthorizationthroughpaymentoftheappropriateper-copyfeeto
theCopyrightClearanceCenter,Inc.,222RosewoodDrive,Danvers,MA01923,978-750-8400,fax
978-646-8600,oronthewebatwww.copyright.com.RequeststothePublisherforpermissionshouldbe
addressedtothePermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ
07030,201-748-6011,fax[phone],oronlineathttp://www.wiley.com/go/permissions.
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsin
preparingthisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyor
completenessofthecontentsofthisbookandspecificallydisclaimanyimpliedwarrantiesof
merchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedorextendedbysales
representativesorwrittensalesmaterials.Theadviceandstrategiescontainedhereinmaynotbesuitable
foryoursituation.Youshouldconsultwithaprofessionalwhereappropriate.Neitherthepublishernor
theauthorshallbeliableforanylossofprofitoranyothercommercialdamages,includingbutnot
limitedtospecial,incidental,consequential,orotherdamages.
Forgeneralinformationonourotherproductsandservices,ortechnicalsupport,pleasecontactour
CustomerCareDepartmentwithintheUnitedStatesat800-762-2974,outsidetheUnitedStatesat
317-572-3993orfax317-572-4002.
Thisbookisforeducationalpurposesonlyandisnotintendedtobelegaladvice.Theviewsexpressed
inthesematerialsdonotnecessarilyreflecttheviewsheldbymembersoftheauthor’slawfirm.
Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsinprintmay
notbeavailableinelectronicbooks.
FormoreinformationaboutWileyproducts,visitourWebsiteathttp://www.wiley.com.
LibraryofCongressCataloging-in-PublicationData:
Miller,EdwinL.
Mergersandacquisitions:astep-by-steplegalandpracticalguide/
EdwinL.Miller,Jr.
p.cm.
“PublishedsimultaneouslyinCanada.”
Includesindex.
ISBN978-0-470-22274-4 (cloth)
1. Consolidationandmergerofcorporations—Lawandlegislation—
UnitedStates. I. Title.
KF1477.M55 2008
346.73(cid:1)06626—dc22
2007028029
ISBN:978-0-470-22274-4
PrintedintheUnitedStatesofAmerica.
10987654321
This book is dedicated to my family—my extraordinarily tolerant
and supportive wife, Barbara; my son, Russ, who beat me at chess
at age 5; and my daughter, Lindsay, who beat one in a hundred
odds to get into her medical school.

CONTENTS
Preface xi
Acknowledgments xv
About the Web Site xvii
CHAPTER 1 Structuring Fundamentals 1
Basic Corporate Finance Concepts 1
Reasons for Acquisitions 8
Three Basic Acquisition Structures 13
Structuring Considerations: Overview 16
CHAPTER 2 The Acquisition Process 23
Overview 23
Valuation of the Business 31
Investment Bank Engagement Letters 35
Confidentiality Agreements 40
Letters of Intent 43
Stay Bonuses and Other Employee
Retention Arrangements 46
Business And Legal Due Diligence 49
Intellectual Property Due Diligence 64
From Signing to Closing 77
Appendixes 77
CHAPTER 3 Corporate (Non-Tax) Structuring
Considerations 79
Business Objectives and Other Nontax
Structuring Considerations 79
Acquisition Structure Diagrams 89
Forms of Acquisition Consideration 90
vii