15.649 | Spring 2003 | Graduate

The Law of Mergers and Acquisitions


Students should consider purchasing the following two books:

  • Oesterle, Dale. Mergers and Acquisitions in a Nutshell. West Group, 2001.
    Most of Oesterle will be assigned.

  • Bagley, Constance, and Craig Dauchy. The Entrepreneur’s Guide to Business Law. West, 1998.
    About a third of Bagley will be assigned.

Other readings will be made available or handed out in class.

There will be substantial additions to this reading list. Many of the guest commentators will be supplementing these readings.

Module I - An Overview of Fundamentals

Class 1: An overview of key players, their legal responsibilities and early roles.

  • Oesterle, Nutshell. “The Basics of a Corporate Acquisition.” Chap. 1.

  • Excerpts from Texaco v. Pennzoil, 729 S.W.2d 768; materials discussing deal that are pages 1-12 of the bound handout (OCW).

  • Mr. Mahoney’s “Pennzoil v. Texaco Deal Timeline”; hardcopy distributed in class.

  • Draft Letter of Intent, pages 13-17 of the bound handout.

Classes 2 and 3: Tax considerations in deal structures.

  • Oesterle, Nutshell. “Federal Tax Treatment of Mergers, Acquisitions, and Reorganizations.” Chap. 8.

  • Mr. Allen’s outline on “Acquisitions and Dispositions of Businesses”; pp. 18-33 of the bound handout. *

  • Mr. Allen’s Excel spreadsheet, Fact Patterns #1, #1(b), and #2: hardcopy was distributed in class; file has been posted on the class server; please note NOT to refer to the Fact Patters on pp. 34-45 of the bound handout. *

* Students are expected to have a broad understanding of the tax issues related to M&A deals, as well as some of the tax choices that managers face in deciding upon a deal structure. Some such examples may include (but are not limited to): the different implications of paying with stock versus cash, the relevance of goodwill, the basic differences of buying assets versus stock, why a manager would make a 338 election (or (h) or (h)(10)), and/or the value of NOLs. The goal is to help students understand the big, strategic tax issues that mangers must consider when doing deals. Students are not expected to be able to determine precise tax consequences, nor will they have to do any math or make any tax computations for this course.

Class 4: Putting the deal together.

  • Marked up copy of the Stock Purchase Agreement; pages 46-97 of the bound handout; you will only be responsible for knowing in detail sections 3.1(a), 5.5, 5.7, 5.9(e), 5.11, 5.12, 5.21, 5.22, 5.23, 5.24, 9.2(b), and 9.3. **

  • Section 2.4 on Liabilities (excerpt from Model Agreement for the Purchase of a Business); pp. 98-102 of the bound handout.

  • Mr. Mahoney’s PowerPoint presentation, a paper version of which was distributed in class. It has also been posted on the class server.

** However, students are also expected to understand the broad but relevant deal-related issues surrounding concepts like “material adverse change clauses”, “representations and warranties”, and GAAP accounting.

Class 5: Employment law: The perspectives of key employees and of the corporation as an employer.

  • Bagley, Entrepreneur’s Guide. “Leaving Your Employer.” Chap. 2 (pp. 9-28). (Skip “Putting It into Practice”)

  • -—–. “Marshalling Human Resources.” Chap. 10 (pp. 265-324). (Skip “Putting It into Practice”)

Class 6: LBOs and the perspective of financial sponsors.

  • Oesterle, Nutshell. “The Target Board’s Power to Block Takeovers.” Chap. 9.

  • -—–. “The Board of Directors’ Decision to Sell the Firm.” Chap. 10.

  • Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261 (OCW). ***

  • Kendall and LeClaire. “The Benchmark Case and the Limits of Preferred Stock Options.” ***

*** Handout, to be distributed in class 4.

Module II - Some Complications

Class 7: Intellectual property as an asset; Selling and buying the hi-tech start-up.

  • Bagley, Entrepreneur’s Guide. “Intellectual Property and Cyberlaw.” Chap. 14 (pp. 487-551).

Class 8: The legal liability of managers and board members.

  • Bagley, Entrepreneur’s Guide. “Going Public.” Chap. 17 (pp. 649-703).

  • Sarbanes-Oxley Advisories.

Class 9: Antitrust concerns and regulatory clearance.

  • Antitrust Law in a Peanut (Akula) (for general background).

  • Varta Bosch (EU ruling on a proposed merger).

  • Department of Justice Press Release: Gemstar-TV Guide Settlement (the “gun-jumping” problem in mergers).

  • AOL/Time Warner merger items:
    Federal Trade Commission Approval (OCW).
    Federal Communications Commission Approval (OCW).
    Comments of FCC Commissioner Powell (OCW).

  • Oesterle, Nutshell. “Antitrust Legislation on Acquisitions.” Chap. 13 (pp. 273-279).

Class 10: The distressed company.

  • Bagley, Entrepreneur’s Guide. “Creditors’ Rights and Bankruptcy.” Chap. 12 (pp. 384-430).

  • Oesterle, Nutshell. “Successorship Issues: Assignments of Contract Rights and Successor Liability.” Chap. 5, but only sections 19, 20, and 21 (pp. 98-120).

Classes 11 and 12: Some complex deal terms, including issues that arise in the purchase of a publicly-held company.

  • Oesterle, Nutshell. “The Target Board of Directors’ Power to Block Takeovers.” Chap. 9 (pp. 231-253).

  • -—–. “The Board of Directors’ Decision to Sell the Firm.” Chap. 10 (pp. 255-265).

Class 13: The hard edge of financial regulation.

  • Akula. “Business Crime: What To Do When the Law Pursues You.” Sloan Management Review 41, 3 (Spring 2000).

  • In the matter of John Gutfreund. (SEC release on action against Solomon executives) (optional unless you are on deck) (OCW).

Course Info

As Taught In
Spring 2003
Learning Resource Types
Lecture Notes
Written Assignments