This Cooley M&A blog discusses Corp Fin’s recent CDIs on disclosure of investment banker fees in tender offers – & suggests that some changes in market practice may be required. Here’s an excerpt:
A review of recent banker fee disclosure for transactions initiated by an unsolicited bid show that it is not current practice for the financial advisor fee disclosure to include a description of alternative fees payable in other contexts, such as in the context of an activist-initiated sale transaction where the target may have agreed to pay the financial advisor one fee for remaining independent and a different fee if the company is ultimately sold.
The new C&DIs appear to require additional transparency in this scenario by requiring narrative disclosure of multiple fee types that would be sufficient to “provide the primary financial incentives for the financial advisors in connection with their analyses and advice.”
In addition to this type of disclosure, New Tender Offers & Schedules CDI 159.02 specifically calls for disclosure relating to the type of fees payable (advisory fees, success fees, etc.), contingencies, milestones & fee triggers, and any other information about compensatory arrangements that would be material to security holders’ assessment of the bankers’ analyses or conclusions, including any material incentives or conflicts.
– John Jenkins