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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Tuesday, May 3, 2022

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine the mechanics of partial liquidity transactions in middle market companies. The panel will discuss the structuring and pricing alternatives and the legal and tax issues associated with each. The panel will also discuss governance issues, including the fiduciary duties of board members and key shareholders.

Faculty

Arjun Murthy
Director
Cascade Partners

Mr. Murthy brings nearly a decade of investment banking, corporate finance and operational experience to the firm. His background primarily includes leading M&A and capital raising transactions across a range of industries in sectors such as packaging, aerospace, industrials, consumer products and retail. He has extensive experience in all aspects of deal execution and deal management, including sell-side, buy-side, and capital raising engagements for private and public middle-market companies.

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Molly Z. Brown
Of Counsel
Brouse Mcdowell Lpa

Ms. Brown’s practice focuses on public and private securities offerings, mergers and acquisitions, corporate governance and compliance matters. She brings significant experience and knowledge leading securities transaction and mergers and acquisitions teams to successful completion of transactions that are revenue generating for clients. Prior to joining the firm, Ms. Brown worked as in-house counsel for top banks, investment adviser/funds, and as law firm partner serving in high-impact roles. In addition to her strong background in securities, mergers and acquisitions and corporate governance. Her regulatory experience includes advising issuers on securities investigations, funds, broker-dealers, investment advisers, and financial institutions on regulatory matters.  Ms. Brown also has experience helping growing businesses plan for future liquidity events and to evaluate what form of liquidity event is most helpful to sustain growth and achieve the client’s objectives.

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Description

Middle market companies have often decided to remain private, but still need options for liquidity events. For companies that remain private, partial liquidity transactions can provide liquidity to key employees and investors while allowing venture capital, private equity and other investors to invest in a successful middle markets company.

Before proceeding with the secondary sale of existing shares, the company must consider whether the deal is structured as a third-party purchase or a repurchase of shares by the company, how to price such sales, and who should be eligible to sell their shares or options. The company must also look at existing transfer restrictions, such as rights of first refusal or more stringent restrictions.

If the company elects to pursue a transaction with multiple potential sellers, such sale may be deemed a tender offer and subject to securities law regulations governing tender offers. In addition, boards of directors must consider their fiduciary duties to all stockholders in conducting these transactions.

There are significant tax issues associated with secondary sales. The sale could result in short-term or long-term capital gain or in ordinary income, depending in part, on the identity of the purchaser and the purchase price as compared to the fair market value (FMV) of the shares based on the company's latest Section 409A valuation--and in some circumstances, may subject the company to withholding obligations.

Listen as our interdisciplinary panel discusses the structuring, legal, governance, and tax issues associated with partial liquidity transactions.

Outline

  1. Middle market companies and the need for partial liquidity: initial issues to consider
  2. Structuring a secondary sale
    • Company repurchase of shares vs. third-party purchases
    • Who will be eligible to sell their shares/options and how much can they sell
    • Pricing
    • Transfer restrictions, rights of first refusal
  3. Documentation; key provisions
  4. Securities compliance
    • When a secondary sale might be deemed a tender offer
    • Conducting/documenting a tender offer
    • Disclosure Issues
  5. Board fiduciary duties
  6. Tax ramifications of a secondary sale--capital gains, 409A, and ordinary income

Benefits

The panel will review these and other critical issues:

  • What factors might discourage a company from facilitating a secondary sale or other partial liquidity events?
  • What are the advantages and disadvantages of a company repurchase of shares vs. a third-party purchase?
  • When is an offer or purchase of securities deemed a tender offer, and what is the tender offer process?
  • How do pricing and structure affect the tax treatment of the sale for the shareholder? The company?