Cooley LLP’s Post

Earnouts (and related disputes) are on the rise! Check out some tips for drafting effective earnout provisions that Tijana Brien (Martinovic), Bobby Earles, and I prepared for Law360.

Good earnout advice. To this, if you represent seller, I would add: 1. Understand why buyer is buying your company. Safeguarding an earnout is much easier if your product is complimentary to buyer's product suite and a sale of your product will help with a sale of their product or vice versa. On the other hand, if buyer is buying you for access to your customers and your products are competing, you have to include terms that address cannibalizing of sales of your product in an attempt to promote the sale of theirs. 2. Be realistic about your evaluation of sales targets if they are the earnout metric. Assuming that buyer will fundamentally change your growth curve, especially initially, may be unrealistic - especially given the time required for post-merger integration. 3. Understand the post-merger integration process and its timing and how buyer will treat your company post-closing (a subsidiary, a division, a business unit). This will impact the reliability of financial reporting about the performance of the company that was bought once it is part of buyer, as well as its costs and revenue.

Great insight

In an article for the January MassCPAs SUM News, attorney Jesse Angeley discusses the importance of representation for a senior management team in a private middle market M&A transaction prior to, during, and at the close of the deal. https://lnkd.in/emB-i7C5

#Corporate attorneys Chad Barton and Claire Lydiard co-authored a Law360 article addressing factors that increase the possibility of post-closing disputes in #mergersandacquisitions involving earnouts. They explain how earnouts enable parties to complete #transactions when a commercial agreement might not otherwise be possible but emphasize the need for careful planning. Read their article for steps to take to ensure a smooth and profitable #deal-making process.

Fried Frank partner Philip Richter was quoted in a recent Bloomberg Law article on the increasing prevalence of earnouts in M&A transactions. In the article, Phil shares insights into the perspective of buyers, highlighting their commitment to supporting the acquired business's growth, even when earnout agreements are in place. Click the link below to read more. #MandA #earnouts

Prepare for M&A in 2024 with these data-based earnout tips. Gain insights on earnout sizes, duration, metrics, and more. https://lnkd.in/gmagbhm2 #earnouts #MergersandAcquisitions #MnA

For shareholders in closely held companies, buy-sell agreements are an incredibly important piece of the planning puzzle for both the company and their own personal planning as well. Ensuring that the agreement and funding mechanism are aligned and working properly, as well as understanding how that impacts personal estate planning, is essential. After the Supreme Court decision in Connelly, many people have questions about what they should do about existing or potential buy-sell agreements. Swipe through the carousel below to see some advice we have for those who find themselves in this situation. #buysell #connelly

Join us on Wednesday, February 28, as our partners Andrea Johnson and Jason Saltzman connect with Morrison Park’s Brent Walker and Sandy Mackay for an engaging discussion regarding rollovers in public M&A transactions.   In particular, they will cover: •          What is a rollover and how are they structured •          What has led to an increase in rollovers •          Key considerations in planning rollovers •          Fairness issues, including application MI 61-101 •          Tricky issues for special committees   Register here: https://lnkd.in/eHUC9KHH   #MergersandAcquisitions #DealMaking #Rollovers #PrivateEquity