富力律师事务所.ppt

富力律师事务所DetroitChineseBusinessAssociationSeminar GrowingaBusinessByAcquisitionsandJointVentures 系列讲座之三 企业兼并与合营 April5 2006 2 AboutFoley LardnerLLP Foley Lardnerisanationallawfirmwith17officesacrosstheUnitedStates andofficesinTokyoandBrusselsNearly1 000attorneysworldwideWehaveaffiliationswithlawfirmsinnearlyeverycountry includingseveralChineselawfirms 3 AboutFoley LardnerLLP Foley LardneristheonlynationallawfirmintheUnitedStateswithasubstantialofficeinDetroit 45lawyers OurDetroitOfficeattorneysspecializeinassistingautomotivecompanieswithalloftheirlegalneeds includingmergersandacquisitionsandjointventuretransactionsOurattorneysincludemanybankruptcyspecialists includinginChapter11cases 4 BackgroundsofFoleySpeakers SteveHilfingerDetroitOfficeManagingPartner Co LeaderofFoleyAutomotiveIndustryTeam19yearsofM Aexperienceshilfinger 5 DCBASeminarSeries Part1 HowtoStartaBusiness FromEurekaMomenttoOperatingCompany May25 2005 Part2 HowtoRaisetheRightMoneyforaGrowingBusiness July21 2005 Part3 GrowingaBusinessbyAcquisitionsandJointVentures Tonight 6 FormatforTonight sSeminar WewilleachcoveraportionofthepresentationthiseveningQuestions inEnglishorChinese arewelcomeaswegoalong wewillalsohavea Q A sessionattheendofourpresentationAlso wewillbeavailableforamoreinformalQ Afollowingourpresentationoryoumaycontactusdirectly 7 First SomeDefinitions Acquisition AnacquisitionofallorsubstantiallyalloftheassetsorstockofabusinessMaybeastockpurchase assetpurchase mergerorothersimilartransaction JointVenture JV AcombinationoftwoormoreentitiesformedforthepurposeofachievingabusinesspurposeMaybealimitedliabilitycompany acorporation apartnershiporotherentityOftenhaveastatedperiodofduration e g untilaprojectiscompleted 8 WhatAreStrategicReasonsforanAcquisitionorJV AccesstoGeographicMarketsEstablishinga toehold inamarketFasteralternativethana greenfield locationAccesstoCustomersManycustomerrelationshipstakeyearstodevelop thismayaccelerateOftenacquisitionsorJVsareattherequestorencouragementofkeycustomers 9 WhatAreStrategicReasonsforanAcquisitionorJV AccesstoTechnologyStrongR Dfunctions capability patents AlternativetolicensingagreementsNote restrictionsontechnologyexportAccesstoManagementStrongmanagementteammaybeinplaceLearningaboutmarketandcustomerswithoutrisksandmistakesof learningbydoing Trainingandcross pollinationofideas 10 WhatAreStrategicReasonsforanAcquisitionorJV AccesstoSupplyChainCompanieswithstrongpurchasingfunctionAvoidrisksinherentindevelopingsupplychain fromthegroundup AccelerateGrowth Growth companiesarevaluedhigher Organic growthrateofbusinessmaybeslowormayhaveslowedNote Acquisition JVaccountingdiffers 11 IsYourCompanyPreparedtoUndertakeAcquisitionorJV Doyouhavemanagementresourcesandtalent includingincross bordertransactionsandmanagingforeignoperations DoyouhaveafullydevelopedbusinessplanthatincludestheacquisitionorJVandintegrationofrelatedbusiness Doyouhavethesupportofkeyconstituentssuchascustomers suppliers banks governmentandshareholders 12 WhatStepsToPrepare First makesureyourexistingbusinessoperationsaresolid acquisitionsandJVsareamajortimecommitment distraction CarefullydevelopabusinessplanStudyallaspectsofthemarket andconsultwithothersfortheirexperiencesandopinionsHireprofessionalstoassistyou includinginvestmentbankers attorneys accountantsandothers 13 HowtoIdentifyanAcquisitionTargetorJVPartner TalktocustomersandsuppliersTalktoyourprofessionals whoareexpertinidentifying buyside opportunities e g investmentbankersandattorneys LookforculturalcompatibilityLookforcompanieswhosestrengthsareyourweaknesses andviceversaNetworktolearnmore e g DCBAevents 14 Acquisitionvs JointVenture AdvantagesofAcquisitionControlovercompanyandoperationsEasiertoadministerpost closing100 shareofprofitsandopportunityDisadvantagesofAcquisitionMoresignificantcapitalinvestmentMayberiskier hardertointegrateMaydivertmanagementattention 15 Acquisitionvs JointVenture AdvantagesofJointVentureKnowledgeandresourcesofpartnerLesscapitalinvestmentSharedriskinnewmarketsDisadvantagesofJointVentureHardertoadminister governanceissuesSharedprofitsandopportunityOftenarenotsuccessfulandmaybedifficulttounwind 16 Sample AcquisitionTransaction USOn LineRetailerAcquiresChineseOn LineRetailerDistributedbooks music videosandDVD sLargestU S on lineretailerwantedtomoveintotheChinesemarket butbecauseoftheculturaldifferencestheyneededanexistingmanagementteamandanestablishedcompanyU S on lineretailersuccessfullyacquiredChineseretailerTheU S companydecidedtodoanacquisitionratherthandevelopfromthegroundupbecauseofthedistributionchallengesintheChinesemarket thetargetcompanyalreadyhadanefficientdistributionsysteminplace Note AnacquisitionwastherightmethodbecausetheU S retaileralreadyhadtheknowledgeandexperienceintheindustrybutneededthelocalmanagementteamandlocalexpertisewithrespecttoChinesedistributionissues 17 Sample JointVentureTransaction JapaneseAutomakerEntersintoJVwithIndianManufacturerofMopedstoManufactureMotorcyclesPriortoJointVenture therewerethreelocalmanufacturesofmotorcyclesinIndia whowereallusingoldtechnologyTheIndiancompanywantedtoteamupwithaworld wideleaderintechnologytohelpgainacompetitiveadvantageoverthethreelocalmanufacturersTheJapaneseautomakerprovideddesignandtechnology theIndiancompanywasinchargeofmanufacturingandmarketingTheJVwassetforatermof10yearsandwasverysuccessfulbutattheendoftheterm theJapaneseautomakerdecidednottorenewandbeganmanufacturingmotorcyclesonitsowninIndiaNote AJointVenturewastherightmethodbecausebothpartiesneededtheknowledgeandresourcesoftheotherpartyinordertomanufactureanddistributemotorcyclesintheIndianmarket 18 OverviewofMergerandAcquisitionClimateinU S GenerallyintheU S currentmergerandacquisitionmarketisstrongforsellersMergerandacquisitionactivityisverystrongandhasreboundedfrom2001 2003timeperiodInmanysectors companiesarebeingsoldatsubstantialvaluations expressedasamultipleofEBITDA EarningsBeforeInterest Taxes DepreciationandAmortization Availabilityoffinancingisstrong bothdebtandequityfinancing EquitymarketshaveimprovedBankfinancingisstillrelativelycheapPrivateequityfirmshavelotsofcashtoinvest 19 OverviewofAutomotiveMergerandAcquisitionClimateinU S MergerandacquisitionclimateintheautomotiveindustryisnotasfavorableforsellersIsmoreofa buyer smarket Automotivesupplierswhoaredependentupon Detroit3 areundergreatfinancialdistressEBITDAmultiplesarelower intherangeof4 5x Manyautomotivebankruptcies Chapter11 Delphi Collins Aikman TowerAutomotive Meridian Intermet JLFrench Dana others ThisfinancialdistresscreatesM Aopportunitiesforbuyers includingChinesebuyers 20 ConfidentialityAgreements Description oneorbothpartiesagreetokeepcertaininformationconfidentialOftenoneofthefirstdocumentssignedinanacquisitionorJVtransactionMayinclude nonsolicitation provisionsregardingemployeesIssuestoconsider Whatitemsareexcluded LengthofconfidentialityagreementGoverninglawandjurisdiction 21 DueDiligence OftenbeginsafterConfidentialityAgreementissignedUsuallydoneinthreephasesInitialduediligenceBasicfinancialinformationMaybeinanOfferingMemorandumSecondstageduediligenceMayprecedeorfollowaLetterofIntentMoreindepthandlengthy moreexpensive FinalduediligenceMostsensitiveinformationleftuntiltheendPricingandcostinformation customercontacts 22 DueDiligence continued Whoisinvolvedinduediligence BusinesspeopleatbuyercompanyAccountantsand orinvestmentbankersAttorneysSometimesotherspecialists e g environmental SignificantduediligenceissuesEnvironmentalContractsandcustomer supplierrelationshipsPensionandemployeebenefits includingretirees ProductliabilityandwarrantyOwnershipofassetsandencumbrancesonassetsOthers dependingonindustry 23 LettersofIntent OftenareusedinacquisitionorJVtransactions sometimescalled MOUs Typicallyanon bindingsummaryofalloftheprincipalterms includingpriceandclosingconditionsOftenincludean exclusivity wheretheselleragreesnottonegotiatewithanyotherpartyfor30 90daysLettersofintentarenotmandatory maymovedirectlytopurchaseagreement 24 WaysToAcquireABusiness TypesofTransactionsAssetPurchaseStockPurchase includingMergers Generally inanassetpurchasethebuyeracquiresonlytheassetsitwantsandassumesonlytheliabilitiesitagreestoassumeGenerally withastockpurchasethebuyeracquiresalloftheassetsandliabilitiesofthecompanyitispurchasing 25 SuccessorLiabilityIssues Eveninassetpurchase abuyercanbesubjecttoliabilitiestothirdpartiesthatitdidnotagreetoassume includingunknownliabilities Thisissometimesknownas successorliability ExamplesofsuccessorliabilityProductLiabilityEnvironmentalLiabilitiesPension EmploymentLiabilitiesTheserisksareaddressedandmanagedbythebuyerintheAssetPurchaseAgreement 26 TypesofDocumentsUsed AssetorStockPurchaseAgreementNoncompeteAgreementsEmploymentandConsultingAgreementsFinancingDocumentsLicenseAgreementsTransitionServicesAgreementOtherclosingdocuments 27 GovernmentRegulationofM ATransactionsinU S Generally M AtransactionsintheU S areprivatelynegotiated oftennotpubliclydisclosedandoftenrequirenogovernmentalapprovalsInaddition generallythereisarelativelyfreeflowofcapitalintoandoutoftheU S tofacilitateM Atransactions subjecttotaxconsiderations 28 GovernmentalRegulationofM ATransactionsinU S CertaintransactionsrequireapprovalornotificationofoneormoregovernmentalentitiesExamples Hart Scott Rodino antitrust ForeignInvestmentandExportControls Exon Florio DepartmentofDefenserules InvestmentReporting U S CommerceDepartment U S StateandLocalTaxFilings 29 Hart Scott Rodino ThisstatuteisdesignedtogivetheU S governmentadvancenoticeofacquisitionsthatmayraiseantitrustconcernsFilingwithDepartmentofJusticeorFederalTradeCommission includingpaymentoffilingfee forcertaintransactionsinexcessof 56 7million dependingonthe sizeoftheparties Generally a30 daywaitingperiod canbeshortened beforetransactioncanbeconsummated usuallyexpireswithoutanyactionbyU S government 30 ForeignInvestmentandExportControls Generally MexportlicensesmayberequiredAlso ifcustomersofacquiredbusinessareincertain banned countries Cuba Iran Sudan etc additionalgovernmentalscrutinyandexportlicenserequirementsmayapply 31 Exon FlorioFilings AcquisitionofU S businessbyforeignbuyersubjecttoreviewforpossiblethreatstoU S nationalsecurity asaresultofforeignownershipofU S businessFilingisoptionalbutifthereisANYpossibleconcernaboutanationalsecurityrisk filingisrecommendedFilingsadministeredbyCommitteeonForeignInvestmentintheUnitedStates CFIUS aninterdepartmentalagencychairedbytheU S DepartmentofTreasuryCFIUSisrequiredtoinvestigatewheretheacquireriscontrolledbyoractingforaforeigngovernmentandtheacquisitioncouldaffectnationalsecurityFailuretofileexposesbuyertopossiblefutureorderofdivestitureifU S governmentlaterfindsthreattonationalsecurityexists 32 Exon FlorioFilings continued CFIUSandthePresidenthave90daystotaltoreviewthefiling investigateasnecessary andobjecttotransactionInmostcases noinvestigationisrecommendedandtransactionproceedsattheendof30daysFullscaleinvestigationsareunusual only30 notificationssubjectedtoinvestigationandonlyonerejected somewithdrawnbutmostrestructuredtoincluderestrictionsonoperations Investigationscanbecome political issues viz Dubai U S Portstransaction CNOOC Unocal Lenovo IBM sPCBusiness etc Forthemostpart however theCFIUSprocessisnotasignificantbarriertoforeigninvestmentintheU S 33 DepartmentofDefenseRegulations Issues DepartmentofDefenseIndustrialSecurityRegulationsRegulationscontrolaccesstoinformationconcerningsensitiveU S DefensecontractsandsubcontractsProgramssubjecttoForeignOwnership Control andInfluence FOCI regulationscanmakeitdifficulttocompletetransaction ortransactionmaynotbeallowedtoproceed 34 CertainOtherGovernmentalRegulations InvestmentReportingFileBE 13FormwithU S CommerceDepartmentAdditionalreportingrequirementsThereisnosubstantivereviewoftransactionU S StateandLocalTaxFilingsStructuretransactiontominimizetaxobligationsPotentialtaxationofearningswhenrepatriated 35 SpecialConsiderations PurchasesinBankruptcy PurchasesofassetsofcompaniesthatareinbankruptcyaresupervisedbytheU S BankruptcyCourtSalesofassetsaregenerallysubjectto Section363 oftheBankruptcyCodeRequires auction ofassetsThereisoftenaleadbidder stalkinghorse Leadbiddergivencertainprotections fees Bestcombinationofpriceandterms includingcertaintyofclosing will win thebidBuyertakesassets freeandclear ofallliens 36 Observations SuggestionsforChineseBuyers JVPartners ItispossibletoacquirecompaniesintheU S withlittleornogovernmentaloversightor