Buying and Selling a Business
San Jose's DPA Law Group represents private Silicon Valley companies in mergers and acquisitions, including stock purchases and sales, asset acquisitions and mergers. We also structure and implement corporate reorganizations including conversions of limited liability companies to corporations and division drop-downs and spin-offs.
Navigating Mergers and the Buying and Selling of Businesses
We urge private companies, particularly those being sold, to engage with their counsel early – before a term sheet or letter of intent is fully negotiated. Early engagement permits a client to receive informed assistance on deal considerations and transactional issues that are not always apparent to the client but which can materially enhance deal efficiency, tax efficiency, mitigate the risk of post transaction disputes and, sometimes, enhance a transaction's likelihood of closing. A provision not adequately addressed by or omitted from a fully negotiated term sheet can be challenging to later adjust or introduce for the first time during the definitive agreement stage without having to make a material concession that could have been avoided when the parties initially engaged in negotiations.
DPA Law Group's Mergers and Acquisition Services
Our merger and acquisition services include:
- Guidance preparing a business for sale
- Input concerning retention of an investment banking firm
- Assistance with pre-transaction employee, IP and financial disclosure matters
- Negotiating and drafting risk allocation and structural issues appropriate for Letters of Intent
- Identifying appropriate deal structures
- Assisting with the management and control of due diligence with an eye to the definitive agreement's representations and warranties, disclosure schedules and statement of exceptions
- Providing input on when to get the accountants involved
- Drafting the definitive deal documents, disclosure schedule and related employment agreements
Representative Engagements
Mergers and acquisition matters handled by DPA Law Group partner Drew Piunti include:
| Roll-up Transaction (reverse triangular merger): | Tenetix, Inc. and Falcon Technologies, inc.; represented one of several acquired targets |
| Merger: | Bullz-Eye Marketing, Inc. into Blazer Graphics and Exhibits, Inc.; represented acquired target |
| Asset Acquisition: | LSI Design & Integration Corporation and Atmel Corporation; represented asset seller |
| Asset Acquisition: | Casto Travel, Inc. and Adventure Specialists, Inc.; represented purchaser |
| Asset Acquisition: | Sunrise Electronics, Inc. and Titan Electronics, Inc.; represented purchaser |
| Asset Acquisition: | Embedded Performance, Inc. and Mentor Graphics, Inc.; represented asset seller |
| Stock Acquisition: | Modulus, Inc. and InCube Labs, Inc.; represented selling shareholders |
| 363 Asset Purchase: | Encompass Services Corporation and Air Systems Acquisition Inc; represented acquirer purchasing assets of a division of bankrupt corporate debtor in possession |
| Stock Acquisition: | EHS Partners Ltd. (Canada) and R. Sterling & Associates, Inc. (California); represent Canadian purchaser |
| Reorganization of Affiliated Corporate Group by double reverse Merger and drop down and spin-off of subsidiary: | Vista Research, Inc., VRI Mergerco, Inc., Vista Engineering Technologies, Inc., Vista Engineering Technologies, LLC, VET Mergerco, LLC, and Vista Leak Detection, Inc.; represented affiliated group of companies |
Acquisitions Compared to Mergers
Although coupled by the phrase "mergers and acquisitions" ("M&A" for short) as though they are almost synonyms, mergers and acquisitions mean slightly different things and can have materially divergent tax consequences.
In an acquisition, as in most but not all mergers, one company acquires another with cash, stock or a combination of the two. Another possibility, particularly common in smaller transactions, one company acquires all the stock of another, or all or most of the assets of another company. For example, Company "A" buys all of Company "B's" assets (typically intellectual property, tangible assets and good-will, but often requiring that certain talent from target agree to work for acquirer) for cash, which means that Company B will have only cash (and debt, if they had debt before) and Company B becomes merely a shell and will eventually liquidate or, possibly, enter another area of business.
Mergers, on the other hand, do not always involve one company acquiring another. It can involve two or more companies becoming one in a merger of equals. One of the more typical private company merger structures, however, the so-called reverse triangular merger, while structured as a merger is in effect an acquisition: a private or a public buyer forms a corporate shell subsidiary which is merged into the acquired "target" private company, and the acquired "target" company survives merger with its assets, debts and employees in tact as a wholly owned subsidiary of the parent. The shareholders of the target typically exchange their shares for shares of the parent company plus cash. Depending upon the allocation of purchase consideration between stock and cash, mergers, including the reverse triangular merger, can unlike most - but not all - asset sales, be structured to defer the majority of capital gains taxation to the owners of the target company.
Contact us to learn more about our firm, our mergers and acquisition services, and how we might be able to help you. You can reach Andrew (Drew) Piunti by phone at 888-915-5520 ext. 7.
