Identifying Acquisition Risks & Rewards
We represented an investment advisory firm that was being acquired by a public company.
Although the deal contemplated that the investment advisor would continue to run his firm after the transaction was completed (subject to the new owner's approval), the sellers were giving up ownership and control of any future appreciation in the value of their "baby." In return, they were to receive cash and publicly-traded stock in the new parent company. However, publicly-traded stock is not always as liquid an asset as recipients sometimes believe.
Our attorneys reviewed and negotiated the acquisition documents and counseled the founder of the investment advisor firm on the terms of the transaction. We also addressed the compliance requirements applicable to the earn-out payments, the tax consequences, the restrictions imposed on the sale of the buyer's stock in the hands of the sellers, and the risks associated with giving up control of the firm.