Page 352 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

governed by a majority independent board of directors). Such structures are difficult and
complex and raise a host of issues, including the need to put into place mutually
satisfactory arrangements to govern the relationship between the acquired company, its
new majority shareholder and the public shareholders following closing. The complicated
issues include whether the majority shareholder will be subject to a standstill, the
majority shareholder’s right to acquire additional shares in the market and increase its
ownership position, anti-dilution rights, registration rights, regulatory cooperation, non-
compete covenants, corporate opportunity allocation, minority shareholder board
representation, limits on majority shareholder power, eventual going-private
transactions and more.

III. CONTRACTUAL ISSUES

The contractual issues that arise in transactions involving major publicly-held
financial institutions can be substantially different than those which arise in smaller
transactions or transactions that do not involve the acquisition of a public company, such
as the acquisition of a closely-held brokerage or investment management firm, an
unincorporated division or business unit, or a closed institution from the FDIC. Disclosure
requirements, the risk that a third party will seek to break up a transaction before the
parties reach agreement, the actions of arbitrageurs and hedge funds and the length of
time that the transaction is exposed to public scrutiny between signing and closing create
pressures not faced in nonpublic transactions. In addition, the fact that there is usually
no private seller available to provide an indemnity against breaches of representations
and warranties places greater emphasis on pre-closing due diligence, while at the same
time diminishing somewhat the significance of individual representations and warranties.
As such, the purchase price to be paid at closing, the treatment of sensitive disclosure
issues and post-signing covenants and contractually insuring that the closing will occur
become all the more important.

The contractual issues that most frequently arise in the context of bank holding
company acquisitions involve (1) pricing, (2) due diligence, (3) closing conditions (and
more generally the issue of certainty of closing once an agreement is inked, including the
"material adverse change" formulation, regulatory condition language and "fiduciary
outs"), (4) employee benefits and (5) lockups, termination fees, no-shop provisions or
other deal protections traditionally entered into simultaneously with the acquisition
agreement. Depending on the facts and circumstances of the deal, each set of issues can
create serious difficulties in negotiations.

A. Dealing with Market Risks in Stock Mergers: Collars and Walk-Aways

Financial institutions mergers and acquisitions take time. Due to the need to
obtain regulatory approvals, it is not unusual for a bank acquisition to take six months or

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