Private Company Sales in the U.S. and U.K.

Transcription

1 Private Company Sales in the U.S. and U.K. A comparison of the law, customs and practice This course can be presented in-house for you on a date of your choosing The Banking and Corporate Finance Training Specialist

2 Course Objectives Participants will: Explore the key basic differences between private company sales in the U.S and U.K Contrast exclusivity agreements with No shop No talk. Be taught about heads of agreement in the different jurisdictions Master the issues relating to representations, warranties and indemnities U.S. vs English law Understand Course in detail Overview the limitations on liability in the US and the UK Be appraised on the differences in rules and practices relating to disclosure Understand split signing, completion conditions and MAC/MAE clauses in the US and UK Course Overview Oscar Wilde is reputed to have said England and America are two countries separated by the same language. The same could be said of the differences in the M&A process. This course contrasts the market-based customs and practices of U.S. and U.K. custom with respect to the M&A process and some of the key legal differences in relation to the sale and purchase of shares of private companies together with some references to related agreements. Whilst the practices and customs that apply to U.S. deals are largely the same across the Continental U.S. (and Canada to some extent), the U.S. is a federal system and there are differences in law and practice between the various states. In this context, references to U.S. law largely refer to New York law, and (where relevant) to Delaware law with some references to Californian law. Globalization and the influence of the European Union means that, despite civil law dominating Europe, many of the practices and customs in relation to M&A are broadly similar in the U.K. and Europe law, so reference is made to civil law systems where these differ from English law (e.g. re duty to negotiate in good faith) The programme does not attempt to offer a linear approach and contrast all the key differences in all customs and practices (e.g. Locked Box remains much rarer in the U.S. than Europe), but simply those where law and practice differs significantly. This course was originally developed for a U.S. investment bank looking to provide their staff with a sound basis on the legal aspects as well as the commercial customs in M&A deals in the U.S. and Europe. In this context it will appeal to lawyers, corporate finance advisors, bankers, accountants and corporates looking in M&A or related activities.

3 Course Content General matters U.S. is a Federal system so different states have different approaches The Big Three - NY law, Delaware, California Terminology - key differences Formalities key differences General principles of interpretation U.S. law English law European law What types of Efforts/ Endeavours English law (review of relevant case law) NY law (review of relevant case law) California Impact on the deal Negligence English law - Gross negligence and willful misconduct NY law ordinary & gross negligence and willful misconduct Duty to negotiate in good faith (review of relevant cases) English law NY law European approach Damages & Liquidated damages & Penalty clauses English law approach Historical position Cavendish Square case Lessons and implications from Cavendish Square NY law approach Approach to CPs English law vs NY Passage of risk - English law vs NY Exclusivity Agreements vs No shop No talk U.K. approach Exclusivity agreements generally U.S. approach No Shop No Talk Gemini vs Ameripark Lessons from the case Heads of Agreement English law Key requirements The essential terms The subject to contract trap NY law Type 1 the 4 key factors per Vacold v Cerami Type 2 the 5 key factors California law Key requirements Delaware law Summary of current position Lessons from the SIGA case

4 How to avoid the pitfalls Representations General difference between English law vs U.S. (NY) approach re representations and warranties Representations in English law Representations in U.S. (is it that different?) Non-contractual representations and waiver of liability for fraud - three key clauses Entire Agreement Non-reliance Exclusive remedies Approach under English law & key cases (e.g. Witter, Grimstead) Position in NY (Danann and Grumman cases) Position in Delaware (ABRY case) Warranties & Indemnities U.S. vs English law Scope of Representations & Warranties generally - U.S. vs U.K. Quantification of damages for breach of warranty/representation Buyer s Knowledge & materiality Materiality scrapes (U.S.) Defined Application Ramifications Seller v Buyer arguments Potential liability FSA vs Rule 10b-5 (Securities Exchange Act) Key aspects for Rule 10b-5 Indemnities Approach in England Approach in U.S. Limitations on liability UK approach Value as is and value as warranted Warranty insurance U.S. approach Great use of Escrow: key negotiation issues for the parties Four potential problem areas (U.S.) FBAR Regs., Definitions, HYC, Domicile Procedures for release of funds How many escrow accounts Dispute Resolution U.K. vs U.S. Disclosure - Practice in U.S vs UK General differences in approach to due diligence General vs Specific disclosures Disclosure bundle and disclosure of the data room Scope of specific disclosures - effectively disclosed against ALL warranties, crossreferencing Disclosure qualifies all vs specific warranties Buyer s knowledge Standard in England vs U.S. approach

5 Sandbagging and Anti-sandbagging Three approaches U.S. case law U.K. approach and case law Split Signing / Completion MAC/MAE clauses Completion conditions generally U.S. vs U.K. Financing conditions generally U.K. U.S. SunGard issues - Typical requirements Other aspects reverse transaction fees, specific performance Repetition of warranties/representations at Financial close / Completion Different approaches in the U.S. - warranties true in all material respects or MAC standard Approach in U.K. MAC/MAE clauses Position in U.K. Position in U.S. generally Different approaches - part of Termination clause vs Stand-alone clause Review of U.S. MAC clauses Position in Delaware (review of cases) Position in NY (review of Inkeepers Trust case) Other matters Stockholder Representative Agreements Hart-Scott-Rodino