January 29, 2020
Public Deals: Guide to Buying a U.S. Public Company
Latham recently put together this 20-page guide to acquiring a U.S. public company. It’s targeted at foreign buyers, but it’s a useful and digestible reference guide for anyone working on a public company deal – particularly if you haven’t done one in a while. Here’s an excerpt on friendly v. hostile approaches:
The acquisition of a US public company can be implemented on a negotiated (i.e., friendly) basis pursuant to a definitive agreement that has been negotiated with the target and its board of directors, or potentially on an unsolicited or hostile basis, without the involvement or prior approval of the board of directors of the target.
The vast majority of transactions are implemented on a negotiated basis, and hostile acquisitions can face a number of challenges, including the ability of a resistant target to use or implement various structural and procedural defenses, the inability to conduct due diligence on non-public information of the target, and the possibility that shareholders will ultimately reject the offer.
In some instances, unsolicited approaches can help serve to bring a target to the bargaining table, with discussions thereafter proceeding on a negotiated basis (whether or not a transaction is ultimately consummated). This does not mean a hostile transaction is never the appropriate or best strategy for the acquisition of a US public company. Our experience suggests, however, that a hostile transaction should be pursued only if the acquirer understands the complexity and risks involved, and then only if the acquirer has determined that a negotiated transaction is highly unlikely or if negotiations have proved futile.
Other topics addressed include transaction structures, financing, shareholder litigation and regulatory approvals. The guide also includes sample timelines for cash-for-stock & stock-for-stock transactions.
– John Jenkins