The M&A Case Study Experiment - Part 1

[al97]

1. Digion wants to acquire Immersive for
   1. Expansion. It received new funding of $500mn it raised from Sequoia and AH. Therefore, it has the capacity to expand to a new jurisdiction, namely, Frankfurt, Germany. This is evident in its rigorous expansion by three acquisition last year across CAN, UK, and US.
   2. Competition. Eliminating competition horizontally and dominating its supply chain vertically.
   3. Management. Immersive’s co-founders’ experience in game server hosting
   4. Synergy. Digion is a tech company that provides distributed stimulation software, whereas Immersive is a multiplayer tech start-up.

1. Immersive’s employees will enter into a restrictive covenant that prohibits them to work for similar company/disclose confidential information within e.g. a year of exiting

1. Clause 5 provided 9 conditions, to ensure that Seller satisfied all conditions before the transaction begins.
2. There are four ways to protect the indemnifier’s liability:
   1. Reverse indemnity: if the loss is caused through the Buyer’s fault, then the Buyer should indemnify the Seller
   2. Limit the duration: limit the time lapsed since the completion to e.g. 6 years which the Buyer can claim
   3. Limit the amount: specify what are the remedies, is it compensation or termination
   4. Express obligation: require the Buyer to mitigate the loss
3. Certainty. Digion has offices in multiple jurisdictions, eliminating the complications of mixing German law with English law.

 

[al97]

Absolutely. We're still sending out the answers to anyone who submits an attempt in this thread. Please have a go first!

I have received your answer Jaysen, incredibly insightful! Thank you very much!

 

[rameses67]

Hi Jaysen,
I've had an attempt at the case study, would you be able to send me the example answer too pls.

Q1

1. Founders

• Digion is interested in the Immersive’s two co-founders as they have years of experience in game server hosting

2. Popularity

• Immersive is popular among game developers, which interests Digion as it works in the game development field and it can help improve it’s offerings

3. IP

• Digion is interested in the valuable IP

4. Start-up

• Digion is interested in Immersive as it is a start-up and it has funding from venture capital firms to carry out the acquisition

Q2
We would advise Elena, to email the co-founders of Immersive to set up a meeting to discuss her concerns regarding Tristan

Ask if they know what Tristan has been doing and that it is hindering the acquisition process. What will they do or have they done to investigate this issue?

In addition, there could be the potential to insert a Non-compete agreement in Tristan's contract as it seems he is trying to poach Digion's employees to potentially start a new company

Q3
The purpose of clause 5 is to protect Digion, such that if one of the conditions is not met, Digion will not go ahead with the acquisition.

Q4
Phrase the warranties along the lines of ‘as far as the seller is reasonably aware…’

This is important as the seller cannot warrant and indemnify against all issues, but they can use vendor protection clauses such as the de minimus clause and de maximus cap in relation to prices. In addition, we could have clauses related to time limits which restricts the period of when the buyer can bring an action.

Q5
Digion, is firstly headquartered in London. English law will be more favourable to Digion in comparison to the law in Germany, which is where Immersive is based.

This is because Digion being based in the UK, they will have legal advisors here in the UK. And as they are a multinational company in the UK, English Law may have favoured them.

 

[tanamontana]

1. Digion may want to buy Immersive to further continue their expansion in international markets - they would benefit from Immersive's expertise, clientele (given their popularity amongst game developers) and knowledge of local regulations etc.. making their integration into another European country easier. As Digion has previously expanded in markets like the UK and USA, they would have access to more opportunities in Germany. Through Immersive's resources and tech, they can also achieve their aim of making their products more effective, efficient and accessible. Benefitting from Immersive's key executives' expertise in the region and the market would be a considerable reason for Digion to acquire them. Finally, Immersive's IP seems to be an important aspect of Digion's decision to acquire them.

2. A potential non-compete for Tristan

3. To prevent misrepresentation claims and any claims to be brought in court which could adversely impact Digion. Exclusion of liability.

4. To avoid court, maximise protection for the seller. Indemnities, being specific about maximum number they may be liable for.

5. Because multinational and immersive is set in different jurisdiction, laws differ and may be a disadvantage for Digion who are headquartered in London and are more likely familiar with Uk's laws. They can rely on expertise by law firms or their own in-house lawyers.

 

[tanamontana]

Would I be able to receive the answers please, I've just attempted it - thank you Jaysen

 

[mx.jsn]

Would I be able to receive the answers please, I've just attempted it - thank you Jaysen

I would also appreciate it if someone could send on the answers document. @Jaysen would this be possible? Have they been uploaded elsewhere? Thanks for your help

 

[Lalis]

I have just found this thread - really helpful.

@axelbeugre appreciate this thread is from 2023; however, could you pls suggest if I may still be able to get the answers document? Reckon there is a condition, so happy to share my answer in this thread before getting the answers doc