While the headlines in 2015 focused on the “megadeal” transactions over $5 billion (there were at least 137 such deals in 2015, according to Thomson Reuters), many transactions involving cross-border activities required dealmakers to address a variety of corporate, tax and regulatory issues. In a number of industries, especially the technology sector, a range of interesting techniques were utilized to address business and legal issues and to position companies to achieve business objectives:

  • Splits/Spins. A number of companies effected the separation of units (including eBay/PayPal and HP/HP Enterprise)by a split-up or spin-off. In the recently announced merger of DuPont and Dow Chemical, the companies stated they intend to subsequently pursue a separation of Dow/DuPont into three independent, publicly traded companies through tax-free spin-offs.
  • Contingent Value Rights. In the pharmaceutical industry and elsewhere, contingent value rights — which provide shareholders of an acquired company with additional consideration upon the occurrence of a specified event — continue to be considered in various transactions. However, valuation discounts of such instruments and legal complexities (sometimes including litigation) often result in the decision not to utilize such instruments in a transaction.
  • Joint Ventures/Collaborations/“Virtual Mergers.” Companies will use various structures to effectively combine business units without a merger. Google and Johnson & Johnson formed a collaboration to develop robots for surgical operations. Cisco and Ericsson announced a “broad strategic partnership” in the networking area.
  • Tracking Stock. The EMC/Dell transaction will involve the creation of a tracking stock for EMC’s interest in virtualization company VMware. A tracking stock permits investors to hold a security whose economics mirror the performance of a specific business unit.
  • Strategic Investments. GM announced an investment in Lyft, and Microsoft made a significant investment in Uber.
  • White Squire. Cerberus made a “white squire” investment in Avon.
  • Asset Transfers/Swaps. In the pharmaceutical space, a number of companies sold or exchanged asset portfolios of products or patents/intellectual property. Such transactions included those involving Sanofi/Boehringer, GSK/Bristol-Myers and AstraZeneca/Takeda.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

BACK TO TOP