The Indian anti-trust regulator has provided that the restrictions under non-compete contracts ‘should not exceed what is reasonably required’. Limited exceptions to this rule apply only to hospitals, clinics, and certain other entities licensed under the New York Public Health Law. The principal areas where additional disclosures are required are: Fairness of the Transaction. Providers need to study the numbers in order to make sure the deal works for them in the long term. The Rule 13e-3 requirements are separate from, and have no impact on, the substantive law of the state of incorporation that governs the transaction. These management companies can own the non-professional assets of a healthcare practice, including for instance equipment, furniture, fixtures and supplies. Private Equity Transaction Timeline. A going private transaction requires the same SEC filings as any other public company acquisition, but with the incremental disclosures required by Rule 13e-3, if applicable. Although an offer may be appropriate for some providers, it may not be as desirable for others. Private equity law involves negotiating, structuring, and documenting a variety of transactions including fund formations, venture capital investments, control acquisitions of public and private companies, and dispositions of previously acquired companies or investments. Such contracts may also contain milestone linked payment mechanics, or other forms of earn-out structures (or incentive fee arrangements) that provide the promoter(s) a ‘cash-out’ if the PE firms exit with handsome returns. The Insolvency and Bankruptcy Code, 2016 has also been an enabler for PE firms to acquire valuable assets that will go under the hammer at attractive valuations. PE firms executing control transactions have driven a shift in the typical mechanisms that are involved in deal making in India, getting it closer to global market standards. In Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. However, a financial sponsor or other non-controlling party should consider whether it makes sense to do as much work as possible up front on the basis of public information, to shorten the potential transaction timeline and maximize its opportunity to get to a deal before a competitive process develops. The lawyers in our private equity transaction practice represent the general partners, sponsors, and limited partners of the funds that provide private capital, as well as the companies, management teams, family offices and entrepreneurs who utilize that capital … The 13D rules apply to any more than 5% “beneficial owner” (persons who have or share voting or dispositive power over the relevant securities) or group of stockholders that collectively “beneficially own” more than 5% of a class of registered equity securities of the target. Phone: Escrow mechanisms: R&W Insurance coverage is not a common alternative to indemnity obligations of promoter(s) in case of buyouts by PE firms, and escrow mechanisms are still favoured as a source of potential indemnity payouts by the promoter(s). [i] N.Y. Educ. Since the early 2000s, Delaware courts generally have not applied the entire fairness standard to non-coercive tender or exchange offers (i.e., unilateral offers to the public stockholders that are not made pursuant to a merger agreement with the target) by a controlling stockholder. Posted by Warren S. de Wied, Philip Richter, and Robert C. Schwenkel, Fried, Frank, Harris, Shriver & Jacobson LLP, on, Harvard Law School Forum on Corporate Governance, Independent Directors and Controlling Shareholders, The Effect of Delaware Doctrine on Freezeout Structure and Outcomes: Evidence on the Unified Approach. It's a desirable option for anyone with a brain for business and finance, as well as being a sound negotiator. Sometimes, the acquirer will seek to get the target comfortable with foregoing a pre-signing market check by offering the target the right to conduct a post-signing “go shop” process. Second, the transaction must have either a reasonable likelihood or a purpose of causing any class of equity securities of the target to become eligible for termination of registration, or to be delisted from the national securities exchange on which it is listed or no longer quoted on the inter-dealer quotation system on which it is quoted. We have represented several of the largest private equity firms in connection with due diligence on franchise systems and preparing agreement of franchise sales and other transaction documents for deals in excess of $150 million. Ownership above 10% or having a right to appoint a director to a company’s board may confer affiliate status. In the current market environment, there is a temptation for interested parties to go into the market and acquire a “toehold” position in the target. It is a much more exhaustive inquiry. Although the initial purchase price for the assets may be high, the compensation offered is generally significantly less than what the provider was making beforehand. Fund formation. The vexing question in going private transactions is who constitutes an “affiliate” who is “engaged in” the Rule 13e-3 transaction. & Stacey Lipitz Marder, Esq. We have represented several of the largest private equity firms in connection with due diligence on franchise systems and preparing agreement of franchise sales and other transaction documents for deals in excess of $150 million. While there are distinctions between the disclosures required in a proxy statement versus a tender offer statement, the practical differences are not material. Moreover, the Delaware courts will apply the “entire fairness” standard to a going private merger transaction with a controlling stockholder, unless certain procedural safeguards are met. A person who previously filed a Schedule 13G is generally required to file a Schedule 13D within ten days after it forms the intent to change or influence control of the target, although this requirement does not apply to persons who filed a 13G pursuant to Rule 13d-1(d) (which applies to persons who held their securities before the target became a reporting company). The team has relationships with major funds including KKR, Nordic Capital, and Cerberus, and advises on buyouts in a number of focus industries, notably healthcare, technology, and financial services. This post is based on their Fried Frank memorandum. New Hyde Park, Rule 13e-3 Requirements. The diagram below shows the different steps in a M&A Mergers Acquisitions M&A Process This guide takes you through all the steps in the M&A process. Partner in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Law § 6522, See People v. John H. Woodbury Dermatological Inst., 85 N.E. R&W Insurance providers undertake a limited review of the due-diligence documents and the deal documents to carve out exclusions to the R&W Insurance policy, which would typically be risks that were identified during the due-diligence process but have not been adequately ring-fenced / provided for in the deal documentation. The diagram below shows the different steps in a M&A Mergers Acquisitions M&A Process This guide takes you through all the steps in the M&A process. The management succession plans should clearly identify the management team (which balances investor and promoter interests during the transitory phase) which would succeed the board of directors (and other management committees) following a departure of the promoters. Non-Compete: In cases of control transactions involving a complete exit by the promoter(s), it is critical for PE firms to execute non-compete contracts with the exiting promoters. Boosted by evidence of successful exits by PE firms on their earlier buyouts, global blue-chip PE firms, and even mid-sized PE firms are continuing to evaluate buyout opportunities in the Indian market. While certain Delaware legal doctrines, such as “Revlon” duties and “entire fairness,” do not apply in some states, in our experience, deal practice in going private situations does not differ meaningfully where the target is not incorporated in Delaware. A special committee should consist solely of independent and disinterested directors, with its own independent legal and financial advisors. Mathew J. Should you have any questions regarding private equity transactions please contact Mathew Levy at 516-926-3320 or MLevy@weisszarett.com or Stacey Marder at 516-926-3319 or SMarder@weisszarett.com. Email: LFisher@fisherzucker.com, 2020 Copyright, All Rights Reserved. While a transaction with a private equity firm can be very exciting and lucrative for healthcare providers, these arrangements must be evaluated in order to ensure that they make sense for the provider and are compliant. The special committee should have a charter or be formed pursuant to board resolutions that define the scope of authority, power and responsibilities of the committee, including the authority to explore alternative transactions and to negotiate the transaction and, in the case of a proposed transaction with a controlling stockholder, to say “no” if that is in the best interests of the target and its stockholders. Pooja specializes in cross border M&A, PE / VC investments, joint ventures as well as post-deal issues and shareholder disputes. Pooja specializes in cross border M&A, PE /. Any such acquisition is, of course, subject to the Hart-Scott-Rodino Act (requiring clearance for acquisitions of voting securities by any person not solely for investment in excess of approximately $94 million), the 13D rules and the federal securities laws generally. 3333 New Hyde Park Road, Suite 211, Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. PE firms undertaking buyouts will have to determine the taxes on capital gains that arise pursuant to the sale. A copy of each report, opinion or appraisal must be filed with the SEC as an exhibit to the Schedule 13E-3. In any circumstance not prescribed by New York law, a physician is prohibited from being employed by a non-physician and partnering with a non-physician in a medical capacity. Members of our team have advised on some of the largest private equity transactions undertaken in the region to date and have been involved in the formation of a number of Africa-focused private equity funds. He can be reached at siddharth.anand@cyrilshroff.com, Cyril Amarchand Mangaldas was founded in May 2015 to continue the legacy of the 100-year old Amarchand & Mangaldas & Suresh A. Shroff & Co., whose pre-eminence, experience and reputation of almost a century has been unparalleled in the Indian legal fraternity.