M&A legal overview

Abstruser

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Jul 19, 2018
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Came across this very useful article on Practical Law (authored by partners at Shearman & Sterling) that gives a high-level overview of the issues involved in an M&A transaction - https://uk.practicallaw.thomsonreut...tPage=true&comp=pluk&bhcp=1#co_anchor_a804919. It could be very useful for anyone preparing for case studies in an AC or interview.

Do note that it is quite a technical piece, so for anyone looking for a more basic overview, TCLA's M&A case study guide (https://www.thecorporatelawacademy.com/why-do-you-want-to-be-a-commercial-lawyer/) is a great place to start. The Practical Law article could be good 'further reading' for anyone that may be so curious. :)
 
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Ricky

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Sep 16, 2018
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This may seem a silly question but I have totally confused myself. On a share purchase within M&A, do you need board member approval or shareholder approval?

The shareholders own the shares, not the board members. So yes the shareholders have to approve the sale.

If the board members recommend the buyers offer to the shareholders then its a recommended bid.

However, if they do not recommend it and the buyer tries to continue it is then a hostile takeover.
 

Will Jones

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Jun 5, 2020
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The shareholders own the shares, not the board members. So yes the shareholders have to approve the sale.

If the board members recommend the buyers offer to the shareholders then its a recommended bid.

However, if they do not recommend it and the buyer tries to continue it is then a hostile takeover.

I don't think that's correct. The shareholders own the shares, but it's the board of the shareholder that decides whether or not the shares of the subsidiary are sold - so shareholder resolutions are not required and you just need board minutes instead.
 

Ricky

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I don't think that's correct. The shareholders own the shares, but it's the board of the shareholder that decides whether or not the shares of the subsidiary are sold - so shareholder resolutions are not required and you just need board minutes instead.

You don't have a board of shareholders - you have a board of directors. All shareholders are entitled to vote (providing the class of shares they own allows them to).

Board minutes are from board meetings involving directors. At a general meeting with shareholders, you have general meeting minutes.

If a company is planning to buy another company then yes the board of directors can agree to purchase it. However, the company being sold, the target, its shareholders will need to agree to sell their shares and as I mentioned if the target's board recommends the offer then it is recommended if not its a hostile takeover where the shareholders go ahead and sell anyway.
 

Will Jones

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Jun 5, 2020
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You don't have a board of shareholders - you have a board of directors. All shareholders are entitled to vote (providing the class of shares they own allows them to).

Board minutes are from board meetings involving directors. At a general meeting with shareholders, you have general meeting minutes.

If a company is planning to buy another company then yes the board of directors can agree to purchase it. However, the company being sold, the target, its shareholders will need to agree to sell their shares and as I mentioned if the target's board recommends the offer then it is recommended if not its a hostile takeover where the shareholders go ahead and sell anyway.

Sorry Ricky but that's not quite right (or we may be talking cross purposes!)

Private Company Sale

If company A is buying company B from company C then the following occurs:

(1) Company A board minutes to approve the purchase
(2) Company B board minutes to agree to register Company A as the new holder of shares in Company B (plus any miscellaneous items like director apptments / resignations)
(3) Company C board minutes to approve the sale

You only need shareholder general meeting minutes for items prescribed by the CA 2006. The target company (B) has no say in whether it's sold or not - that's up to Company C (and in turn by the board of directors of Company C).

Public Company Sale

This is essentially the same structure the above, except that the individual public shareholders are the equivalent of Company C (not B). You are right that these shareholders need to agree to sell their shares and this is indeed by a vote at a general meeting of the shareholders. Whether or not the board of directors of B recommends the sale will determine if the deal is recommended or hostile. (EDIT: and you only need to worry about recommended / hostile deals if the target (B) is publicly traded. There is no such thing as a "hostile" private sale.)

Deals with public elements may also require shareholder approval per the Listing Rules/Takeover Code but these are less common.

The general point remains that in a private M&A sale there is no shareholder approval required.

Hope this helps!
 

Daniel Boden

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  • Sep 6, 2018
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    Sorry Ricky but that's not quite right (or we may be talking cross purposes!)

    Private Company Sale

    If company A is buying company B from company C then the following occurs:

    (1) Company A board minutes to approve the purchase
    (2) Company B board minutes to agree to register Company A as the new holder of shares in Company B (plus any miscellaneous items like director apptments / resignations)
    (3) Company C board minutes to approve the sale

    You only need shareholder general meeting minutes for items prescribed by the CA 2006. The target company (B) has no say in whether it's sold or not - that's up to Company C (and in turn by the board of directors of Company C).

    Public Company Sale

    This is essentially the same structure the above, except that the individual public shareholders are the equivalent of Company C (not B). You are right that these shareholders need to agree to sell their shares and this is indeed by a vote at a general meeting of the shareholders. Whether or not the board of directors of B recommends the sale will determine if the deal is recommended or hostile. (EDIT: and you only need to worry about recommended / hostile deals if the target (B) is publicly traded. There is no such thing as a "hostile" private sale.)

    Deals with public elements may also require shareholder approval per the Listing Rules/Takeover Code but these are less common.

    The general point remains that in a private M&A sale there is no shareholder approval required.

    Hope this helps!
    Yeah I believe @Ricky was referring to the sale of a public company which as you say requires shareholder approval.

    Thanks for your step-by-step approach for the private company sale though that is useful to know!
     
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