Private Company Acquisitions: A Mock Negotiation
Moderated by Byron F. Egan.
We are going to frame our discussion around a hypothetical fact situation. The buyer is an acquisition entity (“Buyer”) organized by a Texas private equity financial buyer. The target corporation is a Delaware corporation (“Target”) headquartered in Manhattan and owned by an extended and disjointed family (now approximately 30 stockholders). Target manufactures equipment at an old facility, which it leases in Brooklyn. The term sheet that the parties initially discussed, without the benefit of counsel, contemplated a negotiated sale for cash of all of the stock of Target to Buyer.
Now, as often happens, Buyer has looked at the term sheet with the benefit of counsel and has realized that the transaction, as set forth in that term sheet, is problematic from Buyer’s perspective. Based on my recommendations, Buyer is going to propose that we restructure this transaction from a stock sale to a sale of assets, or perhaps some combination of both, and is going to submit its form of asset purchase agreement (the “Proposed Agreement”).