Merger and Acquisition Issues re
General Rules re Different Types of Transaction:
[Aside - Wage-Hour Diligence: 2019.11.15 "Are You Really Protected From Wage-and-Hour Successor Liability in an Asset Purchase?"]
2014.02.03 Earn-outs and Duties of Buyer. The decision reaffirms that courts will not rewrite earnouts to impose obligations on buyers to maximize payments. On the other hand, buyers cannot take affirmative action to impede the acquired company’s ability to generate earnout revenue. American Capital Acquisition Partners LLC v. LPL Holdings Inc. (Del. Ch.).
2013.Jan.28 Stock Option M&A Cash-outs and Deduction Timing . . . IRS Advice
The IRS has published generic legal advice (GLAM 2012-010) with respect to stock options and SARs that a target company cashes-out within several days after an acquisition closes (using its own funds or those received from the acquiring company). The IRS advises that "these deductions are governed by the end-of-the-day rule [under Treas. Reg. 1.1502-76(b)(1)(ii)(A)] and are properly reported on Target's short-year return for the taxable year".
2012.Aug Ohio Sup Ct Reconsidering Acordia Decision. See 2012.May.24 Non-compete Limited on Post-Merger Basis (Ohio Ruling). The closing date of a merger triggered a termination of employment with the target company, for purposes of measuring a non-competition agreement's two year post-employment period. The merged company was accordingly not entitled to enforce the non-competition agreement beyond that two-year period, because the agreement omitted a "successors and assigns" provision and referred to service with "the Company" alone. That was the Ohio court's conclusion in Accordia of Ohio v. Frankel.
Change-in-Control Severance and Non-Compete Insights.
Recent 1st and 5th Circuit decisions provide healthy reminders about two often underappreciated M&A issues, namely:
2016. NY Noncompete Not Enforced in Involuntary Termination, despite Offer from Successor Employer. In Buchanan Capital Markets, LLC v. DeLucca, 144 A.D.3d 508 (2016), NY's First Department affirmed the denial of a preliminary injunction seeking to enforce non-compete and non-solicitation agreements against four employees whose employment was terminated without cause prior to a corporate merger. Although the employees were given the opportunity to apply to the successor entity, the absence of a guarantee of future employment caused the appellate court to find insufficient continued willingness to employ the employees, thereby resulting in a finding that they suffered an involuntary termination, which under NY law merited the denial of injunctive relief to enforce noncompete covenants.
2013.Oct.25 Equity Issues in Spin-offs. See this PowerPoint titled "A Tale of Two Spin-offs" by Global Equity.
2012.Mar.12 Motorola's Split-up of Equity Awards. See page 12-13 of MOT's 2012 proxy statement for a description of the equitable adjustment for equity awards that adjusted them to reflect the common stock of each award holder's employer after the split-up.
See Phelps v. Gilbraith, Arizona Court of Appeals 2nd Div. (10/29/2010) in which an Arizona court addresses the damages payable for the breach of a non-competition provision in a sale of business context, and cites the following authority.
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