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ARTICLE · 06 FEBRUARY 2006

M&A Development: SEC Proposes to Amend Tender Offer

Fenwick
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In recent years cash mergers have been used more frequently than cash tender offers, in part due to concerns that target employment, severance or other compensatory arrangements might be deemed to violate the SEC’s "best-price" rule, requiring that equal consideration be paid to all tendering security holders.

United StatesFinance and Banking
David Healy
David Healy
Douglas N. Cogen
Douglas N. Cogen
Paul Dutton
Paul Dutton
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Executive Summary.

In recent years cash mergers have been used more frequently than cash tender offers, in part due to concerns that target employment, severance or other compensatory arrangements might be deemed to violate the SEC’s "best-price" rule, requiring that equal consideration be paid to all tendering security holders. New regulations proposed by the SEC help clarify this rule and should encourage greater use of cash tender offers. Tender offers can be an advantageous acquisition structure, because they can be closed in as few as 20 business days, while a stockholder-approved cash merger will inevitably require more time to submit the proxy to the SEC and engage in an appropriate proxy solicitation period. If the SEC reviews the merger proxy statement, the time advantage of the tender offer approach will be even greater.

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