It’s not only deal price that buyers and sellers tussle over. They also negotiate over who will be in charge at the new company, and other “social issues” such as the location of corporate headquarters, treatment of employee stock options, the makeup of the board of directors, maintenance of employee benefit plans after the closing and post-closing indemnities and insurance for target officers and directors.
Indeed, if you were cynical, you might think that sometimes the difference between a “merger of equals”—where neither side’s shareholders receives a premium—and an acquisition in which target shareholders receive a substantial premium, may turn on which individuals will be running the combined companies. Merger of equal negotiations are more complex than this, but it certainly is a factor.
These social issues are sometimes spelled out in the agreement and in other cases there are more informal arrangements—which should be, and usually are, disclosed in the proxy statement.
There can be, of course, an inherent conflict on some of these issues. Frequently, independent board committees are formed specifically to resolve social issues. Social issues generally don’t involve large financial commitments relative to the size of the transaction. But if you put yourself in the place of the executive officers of a target company—even if they have generous golden parachutes—you can see why the social issues are critical in many deals
No comments:
Post a Comment