M&A: Sell-Side Transactions

The whole unit on one sheet: hiring, marketing, bidding, evaluation, and the tax/antitrust triggers.

Which One-Liners Win Points?

• The tail provision survives termination: a fired banker who closes with an introduced buyer still earns the fee.
• Indemnification flows ONE way: seller indemnifies the bank.
• Spinoff is pro rata to ALL shareholders; split-off lets shareholders choose.
• Teaser = NO name, NO NDA. CIM = name plus projections, AFTER NDA.
• An IOI is a non-binding VALUATION RANGE; an LOI is a firm single price, binding on exclusivity and confidentiality.
• Stapled financing is a SELL-SIDE workstream; advising the seller AND financing the buyer is the tested conflict.
• Change-of-control puts on bonds are at 101% of par, not 100%.
• The Worker Adjustment and Retraining Notification Act (WARN Act) notice is 60 days, not 30 or 90.
• All-stock deal (no premium, no synergies) is accretive if the acquirer's price/earnings (P/E) is higher than the target's P/E.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

• The 3x base amount is the golden-parachute TRIGGER; the 1x base amount is the haircut.
• The deemed-asset-sale election is JOINT and only available when the seller is a consolidated subsidiary or an S-corporation.
• HSR waiting periods are CALENDAR days, not business days (30 standard, 15 cash tender).
• The size-of-person test is WAIVED at $535.5 million and above.
• HSR is antitrust review; CFIUS is national-security review.
• The CIM is a MARKETING document, not a registration statement; projections are the SELLER's, not the banker's.
• A stock deal at the same valuation is LESS accretive than a cash deal because of share dilution.
• "Once covered, always covered" applies to the target's own taxpayer or a statutory predecessor, not to every acquirer; the performance-based-comp exception is gone (repealed by the 2017 tax reform).
• Revlon applies only when a sale of control is INEVITABLE, and the standard is "best price reasonably available," NOT "highest possible price."

How Does the Deal Get Structured, Marketed, Taxed, and Closed?

• Engagement letter fee: historical Lehman-formula tiers (5/4/3/2/1%), negotiated per deal. Sale variants: entire-company, divestiture, spinoff, split-off, reverse Morris Trust (tax-free at 50.1% retention), carve-out; spinoff/split-off are tax-free, divestiture is taxable.
• Stock sale: all liabilities, no step-up. Asset sale: a step-up, but double tax for a C-corp seller. A tender offer is faster than a merger (shareholder vote).
• Seven reorganization types: A (merger, up to ~60% boot), B (stock-for-stock, no cash), C (stock-for-assets, limited boot), D (divisive), E (recapitalization), F (form change), G (bankruptcy).
• The executive-compensation deduction limit is $1 million per covered employee, expanded by the American Rescue Plan Act to five more employees for tax years after 2026.
• The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) requires filing with the Federal Trade Commission (FTC) and Department of Justice (DOJ); a Second Request extends the wait to 30 days after compliance (10 for cash tenders).
• CFIUS, broadened by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), reaches non-controlling investments; most filings are voluntary.
• A cash deal is accretive if the target's earnings yield exceeds the after-tax financing cost. The valuation toolkit is comps, precedent transactions (control premium ~20-40%), discounted cash flow (DCF), and an LBO floor, on a football-field chart.
• Debt/equity issues: change-of-control puts, lender consents, liquidation preferences, vesting triggers. The WARN Act's 33%-of-site test applies only at 50-499 affected employees (500+ needs no percentage test).
• At final round, the banker hands financial terms, including representations and warranties insurance (RWI), to counsel for the agreement and opinion. Series 79 does not test Delaware case law, but the auction (fiduciary-out, no-shop, go-shop) is a built-in Revlon defense.

One-Breath Recap

Sell-side runs a timeline: engagement letter (Lehman tiers 5-1%), a menu of alternatives (sale, spinoff, split-off, carve-out), and a football-field valuation with a 20-40% control premium; market it (teaser, NDA, CIM, bidding procedures), taking non-binding IOI ranges then firm LOIs binding on exclusivity. Seven reorg types handle tax; HSR review runs 30 days for a merger, 15 for a cash tender, CFIUS runs a national-security track. Evaluate each bid on currency and accretion (P/E rule), watch the 101% change-of-control put and the 60-day WARN Act notice, hand off to a legal-led definitive agreement and fairness opinion inside a Revlon auction Series 79 treats as background, not case law.

Need more than the recap? Read the full M&A: Sell-Side Transactions unit.