THE ADVANCED GUIDE TO

MERGERS & ACQUISITIONS

SLIDE 1
DISCUSSION QUESTIONS

COURS
E
 SECTION 4
Deal Structuring I: Acquiring the
LECTURE Target
LECTURE LECTURE
1 2 3
The M&A Deal Asset
Process
LECTURE Structuring Purchases
LECTURE LECTURE
4
5 6
Stock
Mergers I Mergers II
 M&A
DISCUSSION QUESTIONS

TRANSAC
TION
 MAIN COMPONENTS OF
DEAL STRUCTURING
1. Form of M&A transaction
structure
2. Form of consideration
 M&A TRANSACTION
STRUCTURES
Mergers Other
• Direct/Statutory Merger Acquisitions
• Forward Triangular • Asset Purchase
Merger • Stock Purchase
• Reverse Triangular
Merger
• Back-End/Squeeze-Out
Merger
DISCUSSION QUESTIONS

MERGE
RS I
OVERVI
EW
 MERGERS
Mergers are transactions
involving the combination of
two or more companies into a
single entity.
MERGERS
At least one
company that is
party to a merger
“disappears” and
ceases to exist as
a legal entity.
 TYPES OF MERGERS
1. Direct (Statutory) Merger

Merger 2. Triangular Mergers


Forward Triangular Merger
sI 
Reverse Triangular Merger

3. Merger of Equals
Merger
4. Back-End (Squeeze-Out)
s II
DIRECT
DISCUSSION QUESTIONS

MERGE
OVERVI
EW
 DIRECT/STATUTORY
MERGER
• A combination of two+ companies
governed by the statutes of the state in
which the combined company will be
organized (which is why it’s also
referred to as a Statutory Merger).
• At least one company disappears and at
least one survives.
 DIRECT/STATUTORY
MERGER
Takes one of the following forms:
1. Acquiror and Target merge; one of the
parties survives and one disappears.
2. Acquiror and Target merge to form a
new company; both Acquiror and
Target disappear.
 DIRECT/STATUTORY
MERGER
• The surviving company acquires the
assets and liabilities of the merged
companies by operation of state law.
• Acquiror distributes the consideration
directly to Target’s shareholders.
 DIRECT/STATUTORY
MERGER
Direct mergers aren’t very common
(time, expense), but may be used
when similarly-sized companies are
involved.
 DIRECT MERGER I –
STEPS
1. Target merges with and into
Acquiror.
• Target ceases to exist.
• Acquiror is the surviving company
and owns all of Target’s assets and
assumes all of its liabilities.
 DIRECT MERGER I –
STEPS
2. Each share of Target common stock is
converted into the right to receive the
merger consideration.
• The merger consideration is
distributed directly to Target’s
shareholders by Acquiror.
• Each share of Target’s common stock
DIRECT
MERGER
I
DIRECT
MERGER
I
 DIRECT MERGER II –
STEPS
1. Acquiror and Target merge to form
a new company (Newco).
• Acquiror and Target cease to exist.
• Newco is the surviving company
and owns all of Acquiror’s and
Target’s assets and assumes all of
their liabilities.
 DIRECT MERGER II –
STEPS
2. Each share of Target common stock is
converted into the right to receive the
merger consideration.
• The merger consideration is
distributed directly to Target’s
shareholders by Acquiror.
• Each share of Target’s common stock
 DIRECT MERGER II –
STEPS
3. Each share of Acquiror common
stock is converted into the right to
receive a predetermined number
of shares in Newco.
• Each share of Acquiror’s common
stock then “disappears.”
DIRECT
MERGER
II
DIRECT
MERGER
II
PROS &
CONS
ACQUIROR
 ACQUIROR –
ADVANTAGES
1. Flexible form of consideration
(cash, common stock,
combination).

2. Assets and liabilities transfer

automatically without lengthy
documentation.
 ACQUIROR –
ADVANTAGES
3. No state transfer taxes.

4. No minority shareholders (Back-

End Merger).

5. May avoid need for shareholder

approval.
 ACQUIROR –
DISADVANTAGES
1. May need to pay dissenting
shareholders the appraised value of
their Target common stock.

2. May be time-consuming due to need

for Target shareholder and Board
approvals.
PROS &
CONS
TARGET
 TARGET – ADVANTAGES
1. Favorable tax treatment if the purchase
price is paid primarily in Acquiror common
stock.
2. Flexible form of consideration (cash,
common stock, combination).
3. Allows for Target’s shareholders to continue
to have an ownership interest in the
 TARGET –
DISADVANTAGES
1. May be time-consuming if Target
shareholder and Board approvals
are required.

2. Target typically does not survive.

3. May not qualify for favorable tax

DISCUSSION QUESTIONS

TRIANGU
LAR
OVERVI
EW
TRIANGULAR MERGERS
• A Triangular Merger
involves at least three
business entities:
1. Acquiror
2. Merger Sub
3. Target
TRIANGULAR MERGERS
In a Triangular
Merger, Acquiror
forms a subsidiary
(Merger Sub) that
merges with Target.
 TRIANGULAR
MERGERS
• Two types of Triangular
Mergers:
1. Forward Triangular Merger
(FTM) (Merger Sub survives;
Target disappears)
2. Reverse Triangular Merger
FORWAR
DISCUSSION QUESTIONS

D
TRIANGU
OVERVI
EW
 FTM – STEPS
1. Acquiror creates a wholly-owned
subsidiary (Merger Sub) and designates
in Merger Sub’s COI one authorized
share of common stock.

2. Merger Sub issues its one share of

common stock to Acquiror, resulting in
Merger Sub becoming a wholly-owned
 FTM – STEPS
3. Merger Sub merges with and into
Target and ceases to exist as a legal
entity; Target is the surviving company.

4. Target’s shareholders receive the

merger consideration in exchange for
their shares of Target common stock
and the Target shares cease to exist.
 FTM
A FTM can result in significant issues
relating to third-party leases,
agreements, licenses, etc.
PROS
&
CONS
 ADVANTAGES
1. Unlike Direct Mergers, FTMs involve
Target merging with and into Merger
Sub, thus becoming a wholly-owned
subsidiary of Acquiror  Acquiror is
protected against Target’s liabilities.
 ADVANTAGES
2. Certainty of execution  Because the
only shareholder of Merger Sub
(Target) is Acquiror, the transaction
does not need to be approved by
Acquiror’s shareholders.
 ADVANTAGES
3. Because Merger Sub (Target) remains
a subsidiary of Acquiror after the
transaction has closed, it is generally
easier to sell in the future (versus
selling a portion of a fully merged
entity).
 DISADVANTAGES
1. Lack of continuity  The disappearance
of Target may create issues in terms of
contracts and licenses previously
agreed to by Target; many will become
legally void, meaning they need to be
rewritten.
REVERSE
DISCUSSION QUESTIONS

TRIANGU
LAR
OVERVI
EW
 RTM
An RTM is the same as an FTM, except
Merger Sub merges with and into
Target, leaving Target as the surviving
entity and a wholly-owned subsidiary of
Acquiror.
 RTM
Unlike with an FTM, because Target
survives the transaction it will have
fewer problems with third-party
leases, agreements, licenses, etc.; no
need to transfer anything to a new
entity.
 RTM
To the public, Target continues to
operate under its own brand name
but is owned and controlled by
Acquiror.
 Target
Sharehold
ers

• Merger Sub
merges with
and into
Target.
• Target
Survives.
PROS
&
CONS
 ADVANTAGES
1. Continuity  Unlike with FTMs, the
fact that Target survives (and
Merger Sub disappears) means
that none of the contracts
previously agreed to by Target are
lost in the transaction.
 ADVANTAGES
2. Reduced liabilities  As with FTMs,
Acquiror takes full control of Target’s
assets without needing to assume
Target’s liabilities.

3. Tax benefits  Under certain

circumstances, the transaction may
qualify as a “tax-free reorganization”,
DISCUSSION QUESTIONS

BONUS
MATERI
MERGER
AGREEM
ENT
 AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated
as of June 15, 2017, is by and among [Link], Inc., a Delaware corporation
(“Parent”), Walnut Merger Sub, Inc., a Texas corporation and a wholly-owned
Subsidiary of Parent (“Merger Sub”), and Whole Foods Market, Inc., a Texas
corporation (the “Company,” with the Company and Merger Sub sometimes
being hereinafter collectively referred to as the “Constituent Corporations”).
RECITALS
WHEREAS, the parties intend that Merger Sub shall merge with and into
the Company (the “Merger”), with the Company surviving the Merger;
WHEREAS, the board of directors of Parent has unanimously approved
and declared advisable this Agreement and the transactions contemplated
hereby;
WHEREAS, the board of directors of Merger Sub has unanimously
approved this Agreement and unanimously recommended that this Agreement
be approved by the sole shareholder of Merger Sub;
 ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, at
the Effective Time, Merger Sub shall be merged
with and into the Company and the separate
existence of Merger Sub shall thereupon cease.
The Company shall be the surviving corporation
in the Merger and, following the Merger, shall be
a wholly-owned Subsidiary of Parent.
 ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of
Share Certificates
4.1. Effect on Capital Stock. At the Effective Time, as
a result of the Merger:
(a) Merger Consideration. Each Share issued and
outstanding immediately prior to the Effective Time shall
be converted into the right to receive $42.00 per Share
in cash (the “Merger Consideration”). All of the Shares
converted into the right to receive the Merger
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DISCUSSION QUESTIONS

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