June 2, 2020
M&A Financials: Working with the New Rules
I recently blogged about the SEC’s changes to the rules governing financial information required for significant acquisitions & divestitures. We’ve received a number of memos on the new rules, which we continue to post in our “Accounting” Practice Area. This Sidley memo points out some issues that companies need to keep in mind as they work with the new rules. Here’s an excerpt addressing some unique considerations applicable to S-4 registration statements:
It is important to note that if an issuer’s acquisition of the target company is subject to a shareholder vote, the requirements of Form S-4 or Form F-4 will control what historical financial statements must be included for the target company in the proxy statement or proxy statement/prospectus.
Consider, for example, an acquiring issuer that files a Form S-4 proxy statement/prospectus in order to obtain any required shareholder vote. Notwithstanding the maximum two-year period called for in the final amendments, Form S-4 could still require three years of historical financial statements for the target company in the transaction subject to the shareholder vote.
However, if Regulation S-X requires that issuer to include in its proxy statement/prospectus historical financial statements for a target in an unrelated acquisition, the modified time period requirements set forth in the final amendments would apply to that unrelated target company.
The memo provides an overview of the rule changes and their implications in other areas as well. It addresses, among other things, the changes to permissible pro forma adjustments, the use of pro forma financial information in the “significance” determination, and disclosure requirements for individually insignificant acquisitions.
– John Jenkins