A reverse triangular merger was not an assignment by operation of law.  See Meso Scale Diagnostics LLC v. Roche Diagostics GMBH, Del. Ch., C.A. No. 5589-VCP, 2/22/13, http://www.bloomberglaw.com/public/document/CONF_ORD_Meso_Scale_Diagnostics_LLC_vs_Roche_Diagnostics_GmbH_Do. 

The court explained that a company entered into a series of contemporaneously executed agreements that granted it a new non-exclusive license. However, before the transaction was complete the licensor, transferred all of its intellectual property assets, subject to outstanding licensee rights, to a newly created corporation.  These were then acquired in a reverse triangular merger where the new company was the surviving entity.

The plaintiffs sued claiming that the company and various affiliates breached provisions in two agreements.  However, the court granted summary judgment on the first count since the reverse triangular merger was not an assignment by operation of law or otherwise requiring consent.  The court said mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be after the merger.  

Thus, the court dismissed the complaint.

As the host of IMPACT 2013 Venture Summit, Fox invites you or your clients in the technology, healthcare or early stage sectors to be a featured company during the Mid-Atlantic’s premiere venture capital conference.

Featured companies receive the exclusive opportunity to deliver a 10-minute presentation to prominent investors. Past featured companies include The Neat Company, iPipeline and Protez Pharmaceuticals.

If you or a company you know is interested, click here to learn more and apply.

A popular two-tier merger and acquisition structure may trigger certain prohibitions under the Securities Exchange Act of 1934.  In particular, this problem relates to the so-called “Burger King” structure, arising from the private equity fund acquisition of the fast-food chain by a private equity fund, and its simultaneous pursuit of a tender offer and a traditional one-step merger. 

The Burger King deal required that the PE firms agree that, if they could not reach a share majority in the tender offer of generally 90 percent, the PE firms could swith to the one-step merger in the middle of the transaction.  Such a practice would allow the PE firms to save time as well as move faster on the ultimate acquisition.  This practice has been adapted in several other transactions.

Nonetheless, there are always issues.  This dual structure may violate Exchange Act Rule 14e-5.  This Rule prohibits buying or offering to buy the target company’s securities outside of the tender offer.  This happens in the Burger King process although a preliminary proxy statement is actually filed with the SEC, triggering this problem.

Subsequently, the SEC has warned of this potential predicament.  However, the SEC has not offered any clarity on this point or if there will be a Staff statement on this potential problem.  That leaves those who wish to pursue this method in a bind.  If they seek no-action relief from the SEC Staff, they will have to address the Staff’s concerns or outright refusal to go along with the transaction.  In any event, those working on these transactions should be careful with the timing of the filing of these proxys with the SEC, and consider contacting the SEC prior to any filing in the hope the Staff may offer some “pre-clearance.”

Well, as Chaucer said, “all good things must come to an end,” however, we still have the Whopper.

An intriguing phenomenon has occurred.  Regulators have recently noticed that there is a sharp rise in Internet crowd-funding sites. 

Ironically, the SEC still has not promulgated rules for allowing small businesses to raise capital online.  The SEC believes that those rules are months away.  Nonetheless, regulators estimate that there are almost 9,000 websites already dedicated to crowd-funding.

Regulators are deeply concerned that the proliferation of these sites could create more trouble for regulators, who are charged with enforcing thse rules and ensuring investor safety.

“Big Boy Letters” are usually used to identify that the buyer in a transaction has made its own independent assessment of certain risks involved and that certain information has not been disclosed to the buyer by the seller.  In particular, this means that a party is not relying upon certain representations or the lack of representations.

The critical step in these letters is considering the application of these non-reliance provisions are received by the courts and the SEC.  In particular, the SEC has taken the position that such a letter will not foreclose an insider trading liability case under a misappropriation theory  However, courts and private litigants could effectively eliminate or at least limit the potential liability from these letters.

Essentially, the use of these letters is somewhat uncertain depending upon the context.  Nonetheless, these letters are certainly not a complete “get out of jail free” card, and will depend upon the facts and circumstances of each situation.

If you look around Philadelphia, you can see signs of a vibrant, growing city.  Neighborhoods long lost to urban decay and lost manufacturing jobs are finding new life as homes to the growing creative class of artists and entrepreneurs.  Philadelphia is in the nascent stages of a renaissance.  New businesses are created every day, and growing enterprises that might have left the city a decade ago are reinvesting in their hometown in growing numbers.  (The news hasn’t been exclusively good, but it’s still been more positive than negative.)

My colleagues at Fox would tend to agree.  That’s why we’re especially excited for IMPACT 2012 Venture Summit Mid-Atlantic Presented by PACT and AlwaysOn.  Impact 2012 is a conference November 7th and 8th that will be as awesome as its name is long. 

And, as a pretty freakin’ awesome bonus for entrepreneurs: IMPACT is in the middle of its “200 for $200” drive: the first 200 entrepreneurs who sign up get to register at a special $200 rate – that’s $900 off the normal rate.  Not too bad for the opportunity to hob knob with investors, venture capitalists and PE funds at the Ritz-Carlton.