DealLawyers.com Blog

Thanks to all the law firm memos rolling in – and posted in our “Tender Offers” Practice Area – I’ve read a lot of really smart people’s thoughts about what the SEC Staff’s new exemptive order will mean for transaction planning, timing and structure. Here are some insights some of these memos share (headings added):

Wilson Sonsini

New Timelines. We expect the norm for acquisitions that utilize a minimum 10-day offering period to involve the parties taking approximately two weeks after the signing of the merger agreement to prepare the tender offer documents and make regulatory filings under the [HSR Act], followed by the offering period. This results in a sign-to-close period of approximately four weeks.

In this scenario, the acquisition can be completed roughly two weeks sooner than a “traditional” tender offer done with a minimum 20-business day offering period. A sign-to-close timeline as short as approximately two-and-a-half to three weeks may be possible if the parties are motivated and well organized, prepare their tender offer documents concurrently with the merger agreement, commence the tender offer and make regulatory filings a day or two following the signing of the merger agreement and do not encounter any regulatory delays [. . .] A shortened offering period provides a significant new tool for structuring friendly M&A transactions for public companies, especially in deals with limited regulatory considerations.

Go-Shop Periods. A target company may be hesitant to shorten the time during which its board of directors can receive and consider unsolicited (or “topping”) proposals, especially if the company did not engage in a market check prior to signing, or the market check was limited. Additionally, a shortened offering period may have to be sequenced with any “go-shop” period provided for in the merger agreement to ensure that the target company gets the full benefit of its opportunity to solicit a transaction.

Gibson Dunn

Two-Step Mergers. A 10-business day offer period increases the attractiveness of a merger transaction structured as a two-step merger because the front-end tender offer can now be conducted far more quickly, which may accelerate the timing of the second-step merger and deal closure.

Complex/Retail Deals. However, because there will only be half the time to solicit shareholders to tender their shares, the benefits of the 10-business day offer period may be offset to some extent for more complex deals or deals in which there is a significant retail shareholder base.

Regulatory Approvals. [T]here will still be practical considerations that may limit how often the relief will be used. For example, the two-step tender offer structure has generally only been used when the parties believe that antitrust and any other regulatory approvals can be obtained during the same time period as the tender offer, allowing for a speedier closing than when parties are soliciting proxies for a shareholder vote.

Given the waiting period for approval under the [HSR Act] in cash tender offers is 15-calendar days, the 10-business day tender offer will allow for a meaningful increase in speed to closing for transactions where HSR Act approval is likely to be received within that 15-calendar day period. However, when regulatory approvals are likely to take longer than the time it takes to obtain approval via a shareholder vote, transacting parties still may prefer to use one-step mergers in order to more quickly mitigate and end the risk of an interloper’s challenge.

Covington

Assess eligibility early. Companies and their advisors should evaluate early whether a contemplated tender offer can satisfy all of the Order’s conditions. The all-cash, fixed-price requirement and the exclusion of going-private transactions, cross-border offers, and contested situations will mean that many, but by no means all, tender offers can take advantage of the shortened minimum offering period. For “plain vanilla” third-party or issuer tender offers, structuring the transaction from the outset to take advantage of the shortened minimum offering period may provide meaningful strategic benefits.

Closely monitor deadlines to communicate changes. The compressed timeline makes the change-communication windows especially tight. In a 10-business day tender offer, a change in consideration would need to be announced by the morning of the fifth business day of the offer. Parties should plan offer terms with this constraint in mind as significant changes later in the offer period would require an extension.

– Meredith Ervine