Mergers & Acquisitions

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The term “Acqui-hire” is commonly used to describe an M&A transaction where the buyer is predominantly interested in acquiring key employees of the target and not specifically the underlying business and/or assets. This type of transaction is particularly common in the technology and software industries, where key talent can often be more valuable than the underlying product or service, although it has become more prevalent in other industries as well. For the target employees and founders, such an acquisition may represent a “soft landing” in the event that they find that their organization won’t scale in the way that was previously imagined or if their funding sources have dried up.Continue Reading What You Need to Know about Acqui-Hires

The past few years have seen dramatic shifts for mergers and acquisitions involving automotive dealerships. It has been estimated that approximately 3% of dealerships undergo a change of ownership in an average year. In the early days of the COVID-19 pandemic, however, deal flow in this sector nearly came to a complete halt due to the nationwide lockdown and a lack of demand. By early 2021, the industry had effectively made a full recovery in spite of supply chain and inventory challenges and M&A activity in this space rebounded accordingly, with a record 383 transactions completed in 2021, and an estimated 374 transactions completed in 2022. Despite larger U.S. economy macroeconomic headwinds and leveling consumer demand, buy/sell activity in the auto dealer sector is expected to remain robust in 2023 and beyond as several prominent acquirors continue to deploy their capital and more sellers coming to market due to a variety of reasons, including estate planning and general uncertainties about the larger economy.Continue Reading The Art of the Dealership: A Legal Road Map for Buying and Selling Automotive Dealerships

Buying a small business government contractor may not be as simple as a standard acquisition. This is particularly true if the small business wants to continue to qualify for federal small business set-aside and sole-source awards during negotiations. The U.S. Small Business Administration (“SBA”) treats stock options, convertible securities, and agreements to merge (including agreements in principle), as having a “present effect” on the power to control a concern. So if a letter of intent is sufficiently firm to be considered an agreement in principle, the SBA’s regulations require such agreements be given “present effect” on the power to control a concern – deeming the two entities are immediately affiliated. In other words, the small business likely is no longer small (and, if it is a specialty small business concern, like woman-owned or service-disabled veteran-owned, it is likely ineligible for those programs as well) before the deal even is done. On the other hand, agreements to open or continue negotiations towards the “possibility of a merger or a sale of stock at some later date” are not considered agreements in principle, and are not given present effect. In practice what this means is that a letter of intent must be carefully drafted to ensure that it does not trigger the present effect rule before the parties are ready or willing to be considered affiliated.Continue Reading Buying or Selling a Small Business Government Contractor? Draft the Letter of Intent Carefully to Avoid Immediate Affiliation

Kandace Watson, Corporate M&A Partner, Sheppard Mullin, and Michael-Bryant Hicks, a seasoned EVP, General Counsel & Corporate Secretary recently discussed mergers and acquisitions perspectives from the Boardroom and C-Suite. From the Board and Executive Management viewpoint, there are only a few key important wins.Continue Reading Mergers & Acquisitions Insights: Perspectives from the Boardroom and C-Suite

The Department of Justice recently filed a complaint to prevent Booz Allen Hamilton’s $440 million acquisition of “agile and innovative” competitor EverWatch, Inc.[1] Among the notable aspects of the complaint is its definition of the relevant market as a single NSA contract and its assertion that the merger agreement itself constituted a violation of Section 1 of the Sherman Act.Continue Reading DOJ Sues to Block Merger Between Booz Allen Hamilton and EverWatch Based on Antitrust Concerns Relating to Single-Contract Market

Since President Biden’s July 2021 direction to the Federal Trade Commission (“FTC”) to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility,” the FTC has ratcheted up its scrutiny of and investigations into non-compete agreements and other restrictive covenants. Now, the FTC has expanded beyond post-employment restrictive covenants to tackle “sale of business” non-competes. Most recently, the FTC voted in favor of a deal-changing proposed order against ARKO Corp. related to its 2021 acquisition of sixty fuel outlets from Corrigan Oil Company.Continue Reading Buyer (and Seller) Beware: The FTC Is Coming for Your M&A Non-Competes

Technology solutions for the transfer, storage and management of electronic files and other digital content is vitally important for organizations to meet compliance obligations, ensure adequate data security and to administer company data generally.  Companies that provide solutions in this space – including in managed file transfer (MFT), file transfer protocol (FTP), cloud content storage and management and file sync-share, among others – are therefore very attractive targets for buyers in the “software-as-a-service” space.  Given that these businesses are charged with safeguarding their client’s precious data, however, there are unique issues in doing deals involving these types of businesses, which both potential buyers and sellers must be aware of.Continue Reading Buying and Selling a File Management, Storage and Transfer Business

This December, the Delaware Supreme Court penned two decisions that shined the spotlight on purchase agreement provisions that are often afterthoughts in negotiations.  In Golden Rule Financial Corporation v. Shareholder Representative Services, No. 61, 2021, 2021 WL 5754866 (Del. Dec. 3, 2021) (ORDER), the Court reviewed the post-closing “true up” language and determined that “consistently applied” accounting principles in the post-closing true up does not necessarily mean “in the same manner as had been applied prior to closing.”  And in AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, –A.3d–, 2021 WL 5832875 (Del. Dec. 8, 2021), the Court confirmed what it means to operate a business in the ordinary course between signing and closing during a pandemic.  The Golden Rule and AB Stable decisions provide an insightful frame of reference for practitioners to rethink what these provisions mean and how they may want to recraft them to allocate risk as intended.
Continue Reading Delaware Supreme Court Shines Spotlight on Boilerplate Purchase Agreement Provisions

In Shareholder Representative Services LLC v. Albertsons Companies, Inc., 2021 WL 2311455 (Del. Ch. June 7, 2021), the Delaware Court of Chancery (Slights, V.C.) provided key guidance on mergers and acquisitions (“M&A”) earnout disputes regarding contractual earnout language, the applicability of the implied covenant of good faith and fair dealing, extra-contractual discussions and promises and post-closing behavior of the acquirer.  This opinion serves as a reminder to M&A transaction parties on important drafting concepts in earnouts, as well as how to conduct themselves during the negotiations and earnout period.
Continue Reading Delaware Court of Chancery Decision Provides Guidance on M&A Earnouts

This article originally published on Food Manufacturing.com on June 1.

2020 was an up-and-down year for mergers and acquisitions in the food and beverage industry.  With the onset of the COVID-19 pandemic in the first half of the year, deal making activity was largely put on hold.  In the second half of the year, however, M&A activity resumed in force such that the total number of food and beverage transactions for 2020 actually ended up slightly exceeding 2019.  And with private equity firms sitting on a large amount of cash that needs to be deployed and strong corporate balance sheets for strategic buyers, 2021 looks like it should be a banner year for food & beverage M&A.  However, buying and selling food & beverage companies presents a unique set of challenges.  This article provides an overview of certain legal considerations for parties engaging in M&A transactions in this sector to be aware of with the goal of providing actionable advice to maximize value.
Continue Reading Keys to Maximizing Value in Food & Beverage M&A Transactions