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Negotiating Public-Private Mergers
By Broc Romanek, Rick Climan, Wilson Chu, Steve Glover*
The M&A Lawyer, July/August, 2002
Merger agreements between publicly-traded and privately-held companies are
generally recognized as among the most challenging M&A deals to negotiate. They
combine many of the difficult public company issues with the tricky indemnification and
related issues that don’t arise in the pure public company context, where representations
and warranties virtually always expire at the closing of the merger.
Many of the most interesting and potentially contentious issues in public- private
mergers come up in those particular deals where all — or at least part — of the purchase
price is paid in the form of stock of the publicly-traded acquirer, as distinct from pure cash
mergers. This discussion will primarily focus on these stock-for-stock deals.
The panelists addressed five general topics:
Pricing formulations in public-private deals, with a particular focus on exchange
ratios and price-based walk rights.
...
Walk rights and closing conditions, with a focus on "MAC" (material adverse
change) outs.
Post-closing indemnification issues and related issues concerning the use of
escrows in public-private mergers.
...
Rick Climan: One of the most significant risks faced by privately-held target
companies and their stockholders in stock-for-stock deals is the risk of a major decline in
* This is an edited transcript of a panel discussion sponsored by RealCorporateLawyer.com in late
June 2002. The discussion was moderated by Broc Romanek, Managing Editor of The M&A Lawyer. The
panelists were Rick Climan, a partner at Cooley Godward LLP, Palo Alto and San Francisco, Wilson Chu, a
partner at Haynes and Boone LLP, Dallas, and Steve Glover, a partner at Gibson Dunn & Crutcher LLP,
Washington, D.C., and a member of The M&A Lawyer’s Editorial Advisory Board.
365
By Broc Romanek, Rick Climan, Wilson Chu, Steve Glover*
The M&A Lawyer, July/August, 2002
Merger agreements between publicly-traded and privately-held companies are
generally recognized as among the most challenging M&A deals to negotiate. They
combine many of the difficult public company issues with the tricky indemnification and
related issues that don’t arise in the pure public company context, where representations
and warranties virtually always expire at the closing of the merger.
Many of the most interesting and potentially contentious issues in public- private
mergers come up in those particular deals where all — or at least part — of the purchase
price is paid in the form of stock of the publicly-traded acquirer, as distinct from pure cash
mergers. This discussion will primarily focus on these stock-for-stock deals.
The panelists addressed five general topics:
Pricing formulations in public-private deals, with a particular focus on exchange
ratios and price-based walk rights.
...
Walk rights and closing conditions, with a focus on "MAC" (material adverse
change) outs.
Post-closing indemnification issues and related issues concerning the use of
escrows in public-private mergers.
...
Rick Climan: One of the most significant risks faced by privately-held target
companies and their stockholders in stock-for-stock deals is the risk of a major decline in
* This is an edited transcript of a panel discussion sponsored by RealCorporateLawyer.com in late
June 2002. The discussion was moderated by Broc Romanek, Managing Editor of The M&A Lawyer. The
panelists were Rick Climan, a partner at Cooley Godward LLP, Palo Alto and San Francisco, Wilson Chu, a
partner at Haynes and Boone LLP, Dallas, and Steve Glover, a partner at Gibson Dunn & Crutcher LLP,
Washington, D.C., and a member of The M&A Lawyer’s Editorial Advisory Board.
365
