The acquisition term sheet from the seller s perspective
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Jones, Day, Reavis & Pogue. The Acquisition Term Sheet from the Seller’s Perspective. By Conrad E. J. Everhard. When You Cut Your Deal, Don’t Stop Negotiating at the Purchase Price. 1. Structure Liquidity Personal Liability Employment Package Due Diligence Non-compete.

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The acquisition term sheet from the seller s perspective l.jpg

Jones, Day, Reavis & Pogue

The Acquisition Term Sheet from the Seller’s Perspective

By Conrad E. J. Everhard


When you cut your deal don t stop negotiating at the purchase price l.jpg
When You Cut Your Deal, Don’t Stop Negotiating at the Purchase Price

1

  • Structure

  • Liquidity

  • Personal Liability

  • Employment Package

  • Due Diligence

  • Non-compete


Reduce principal terms of deal to writing loi or term sheet l.jpg
Reduce Principal Terms of Deal Purchase PriceTo Writing (LOI or Term Sheet)

2



Slide5 l.jpg

4 Purchase Price

Bring Out Your Dirty Laundry at the Outset


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Make Sure that Purchase Price is Liquid Purchase Price

5

  • Market Risk Pre-Closing

  • Market Risk Post-Closing


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Market Risk Pre-Closing Purchase Price

  • Two kinds of pricing: Fixed Exchange Ratio or Fixed Price

  • Fixed Exchange Ratio: Share risks of upside\downside after announcement

  • Fixed Dollars: Upside protection held by Buyer and downside protection held by Seller

  • Collars, Floors, Price Protection, Closing Price


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Market Risk Post-Closing Purchase Price

  • Securities Laws - US, Europe, Asia

  • Insider Trading Policies of Buyer

  • Pooling Rules (Affiliates)

  • Contractual Restrictions

  • Market Conditions and Other Intangibles


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Strategies for Enhancing Liquidity of U.S. Securities Purchase Price

  • Insist on Registration Statement at Closing

    • Guarantee Trading Windows

  • Do Your Due Diligence

  • Don’t Become an Insider or Become a Super-Insider

  • Early Publication of Combined Financials

  • Hedge and Put Mechanisms, Price Protection


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    Don’t Give The Purchase Price Back Purchase Price

    6

    • Purchase Price Adjustment

    • Representations and Warranties

    • Personal Indemnities


    Strategies for limiting liability l.jpg
    Strategies For Limiting Liability Purchase Price

    • Watch Out for Contingent Liabilities

      • No Bearing to Actual Loss

  • Watch Out for Measurement Date

  • Coordinate Interaction Between PPA and Indemnities (Don’t Double Count)

  • Purchase Price Adjustment


    Strategies for limiting liability12 l.jpg
    Strategies for Limiting Liability Purchase Price

    • Factor Exposure into Purchase Price

    • Eliminate Post-Closing Effects fromLiability Exposure

    • Limit Recourse to Escrow Holdback

      • Risk Shifting and Catastrophic Exposure

    Representations and Warranties


    Strategies for limiting liability13 l.jpg
    Strategies for Limiting Liability Purchase Price

    • Incentivize Buyer to Act Reasonably

      • Deductibles and Caps, Cost Sharing

      • Limit Survival Period of Warranties

      • Place Control on Third Party Claims

      • Put Legal Fees of Buyer at Risk

    • Offer Alternatives

      • Comprehensive Due Diligence

      • Opinions of Counsel

      • Insurance, Others


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