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Responding to Acquisition Offers in ESOP Companies
by Neil Brozen, Nancy Dittmer, Stephen P. Magowan, Corey Rosen, Randolph R. Smith, Jr., and James Steiker
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Format: Perfect-bound book, 40 pages
Publication date: February 2011
Status: In stock
- Fiduciary Issues and Practical Solutions for Boards of Directors in ESOP Companies When Responding to Acquisition Offers
- Basic Operative Principles for a Board of Directors: Sources of Law and an Overview of the State Statutes
The General Duties of a Board of Directors
The Business Judgment Rule
The Application of the Business Judgment Rule in the Sale of Business
Specific Issues for the Sale of an ESOP-Owned Company
- Responding to Unsolicited Offers to Purchase ESOP Companies: Issues for Plan Fiduciaries
- The Initial Response to an Acquisition Offer
Responding to an Offer: Step-by-Step
- Operational Issues Stemming from the Sale of an ESOP Company
- Sale of an ESOP Sponsor Company: Questions of Time, Money, People, and the Law
- First Steps When an Offer Comes In
Sale Structure, Letters of Intent, and Exclusivity Agreements
Cash, Stock, or Both?
The Fairness Opinion
Key Aspects of the Purchase Agreement for the ESOP
What Happens to the ESOP?
- Employee Relations Issues in ESOP Company Sales
- Communicating Corporate Policy on Being Acquired
Communicating About a Possible Sale
Issues When the Sale Is Completed
- Bofors: A Case Study of an ESOP Sale
- Putting a Sale Together
The Payout and Beyond
- Appendix: Sample Company Acquisition Policy
From "Responding to Unsolicited Offers to Purchase ESOP Companies: Issues for Plan Fiduciaries"The structure of the sale normally determines the approval process for a sale of the company. Most buyers want to purchase assets and assume specific liabilities since this limits the risk against assuming all liabilities, especially those that are not on the balance sheet or otherwise identified. The sale of substantially all of the company assets will require participant voting on the transaction as it is one of seven transactions requiring "pass-through" voting to participants. Also, in almost all cases, as concerns the ESOP, there will be an additional tax on the transaction due to the sale of assets which would not exist if there were a stock sale. This requires that the price be sufficient to compensate for this.
The trustee is required to provide participants with sufficient information regarding the transaction to allow them to make an informed choice or intelligent decision when they vote shares allocated to their account. This information statement is usually prepared by the trustee and their legal adviser and reviewed by the company and its legal advisor. The trustee has the authority to determine the final document that is distributed to participants along with their voting instructions and directions. The document needs to be written so participants can understand them. Most information statements will include a factual explanation of the transaction, analysis of the transaction, recommendations by management, the board and trustee, current financial statements and a fairness opinion, participants' rights to direct the trustee. Many trustees will meet with groups of participants to review and discuss the information statement and more importantly, respond to their questions.
The trustee must ensure that the information provided in the information statement or during participant meetings is not false or misleading. The trustee must also monitor the solicitation of votes to insure participants are not subject to improper pressure or influence from management and to maintain confidentiality of the voting instructions from the participants by having the voting instructions sent directly to the trustee. Votes should be tallied off-site and management and the board should not have access in any way to individual ballots. Having an outside accounting or administrative firm or independent trustee do the counting is highly desirable.