Chapter 48 - CHAPTER 48 MERGERS AND ACQUISITIONS

• Jurisdiction: Colorado

CHAPTER 48 MERGERS AND ACQUISITIONS

Tara L. Dunn, Esq.^*

SYNOPSIS

§ 48.1 CHOOSING A STRUCTURE: MERGERS, STOCK SALES, AND ASSET SALES

§ 48.1.1—Tax Considerations
§ 48.1.2—Portion of Business Acquired
§ 48.1.3—Legal Effects
§ 48.1.4—Corporate Approval Requirements

§ 48.2 MERGERS

§ 48.2.1—Merger Documentation and Filing Requirements
§ 48.2.2—Dissenters' Rights in Mergers
§ 48.2.3—Legal Effects of Mergers
§ 48.2.4—Short Form Parent-Subsidiary Mergers

§ 48.3 STOCK SALES

§ 48.3.1—Holdouts
§ 48.3.2—Drafting Issues

§ 48.4 ASSET SALES

§ 48.4.1—Dissenters' Rights in Asset Sales
§ 48.4.2—Successor Liability in Asset Sales

§ 48.5 DUE DILIGENCE; DRAFTING TIPS

§ 48.5.1—Due Diligence Checklist
§ 48.5.2—Potential Problem Areas
§ 48.5.3—Review of Books, Records, and Contracts
§ 48.5.4—Practice Tips for Drafting Agreements
§ 48.5.5—Earn-Out Provisions
§ 48.5.6—Caps and Baskets
§ 48.5.7—Recourse, Hold-Backs, and Escrow

§ 48.6 REQUIREMENTS FOR INSIDER TRANSACTIONS

§ 48.7 CONCLUSION

EXHIBIT

Exhibit 48A—Legal Due Diligence Checklist

The process of buying, selling, and combining businesses is an essential part of the free market system. Merger and acquisition transactions allow entrepreneurs to capture the value of their hard work, investors to put their capital to productive use, and consumers to enjoy the benefits of an efficient marketplace.

At the heart of every merger or acquisition is the transfer of property, whether stock or assets. Although lawyers necessarily play a significant role in this type of transaction, their roles can vary — from scribe to hands-on counselor. This chapter provides an introduction to the issues that attorneys may encounter when advising clients involved in the purchase or sale of businesses under the Colorado Business Corporation Act (CBCA).¹

This chapter covers corporate stock sales, asset sales, and mergers under CBCA.² Attention is given to statutory provisions governing documentation and required procedures, including those governing dissenters' rights. The chapter addresses asset sales, with a focus on successor liability. It also covers due diligence issues and discusses approval requirements under Colorado corporate law for acquisitions involving insiders.³ Finally, the chapter includes drafting tips that are applicable to all types of acquisition structures.

Throughout this chapter, the term "seller" is used to refer to the corporation selling its assets, having its stock transferred, or effecting a merger transaction in which it is...