Considerations For The Acquisition Of A Non-U.S. Company By A U.S. Public Company

When it is time to sell a company, there are a number of financial and legal steps a business should consider to ready itself for a merger or acquisition. When the potential buyer is a U.S. public company, that list may get longer. The following are some common issues that arise in the context of a U.S. public company acquisition of a non-U.S. company. Being familiar with, and prepared for, the pressure points facing a U.S. public company will make for a smoother acquisition process for both sides.

Excerpt:

1. Purchase Price Adjustment vs. "Locking the Box"

In most U.S. acquisitions of a privately-held target company, the purchase price agreed to at the signing is subject to a closing adjustment and/or a post-closing adjustment based on the closing date amount of certain financial accounts; typically, cash, indebtedness, and net working capital. This differs from the "locked box" approach that is more common in Europe, whereby a buyer and seller agree on a fixed purchase price that is calculated based on a "locked box balance sheet", which is fixed at an agreed upon pre-signing "locked box date", and is coupled with representations and warranties from the seller that protect the...