Classification of M&A deals by the terms of equity contract:
The equity contracts lay elaborate framework for the rights, obligations, assets, liabilities, risks, control, financial benefits, etc. of the parties.
Following are the key terms:
Transferability:
Unless until provided in the articles of association, the equity shares of private companies are not typically transferable.
Participation in excess profit:
Certain types of convertible preference equity instruments can grant the holders of other than common equity e the rights to participate in excessive profits.
Accumulation of dividend:
The payment of dividend on the preference equity can be communicative or non cumulative. It means it can be transferred to the next year or not.
Convertibility:
Certain security are convertible from Debt type into equity type and vice versa. Also, certain other securities are convertible from one class of equity to another class of equity.
Tag along:
If a majority shareholder sells his stake, it gives the minority shareholder the right to join the transaction and sell their minority stake in the company.
Drag along:
A drag-along right is a provision that enables a majority shareholder to force a minority shareholder to join in the sale of a company. The majority owner doing the dragging must give the minority shareholder the same price, terms, and conditions as any other seller.
Exit:
The capital investment in equity form is supposed to remain in the business for infinite time. However, the shareholders can agree between themselves when one of them would dispose of the shares to the other and on what terms and conditions.
First right of refusal:
The first right of refusal gives the other shareholders to buy dishes at the same price and terms and conditions that again given to a third party.
Apohan understands the terms of the contracts of all the varieties of M&A deals in depth. Apohan drafts full proof, practical and exhaustive contract without causing any interpretation for understanding issues between the investor and the businesses. Apohan manages the transaction right from the problem identification phase, to the closure of deal with perfection.