Restructuring Through Stock for Stock Merger

A cash-poor California service company had been financed years earlier by preferred shareholders who were now eager to get out.

When a competitor approached the company with an offer to merge, we handled the transaction as a merger of equals to serve the interests of the California company and to arrange for the merged entity to have adequate capital.

We negotiated the merger transaction through multiple details of stock valuations, exchange terms, stock option cash-outs, tax aspects, management restructurings, and customer and vendor contract consolidations.  At the same time, we negotiated with a venture capital investor to infuse the merged company with enough cash to allow the preferred shareholders to cash out and to cover consolidation expenses, with cash left over for operating purposes.

During the deal process, senior management of the original company underwent a shake-up.  The result was a change in deal philosophy and tactics.  We nevertheless managed to close the eight figure deal on schedule, satisfying all parties, their shareholders, business partners, and the regulators.  The new management team of the combined company was able to grow the business with new capital in new markets and with a more favorable shareholder constituency.