Phone: (504) 568-1990 Address:Fax: (504) 310-9195 601 Poydras Street, Suite 2775Website: www.lawla.com New Orleans, LA 70130

Top Mistakes Made During an Acquisition - And How to Avoid Them!

Presented by:

Stewart Peck and Benjamin KaddenPartners

Lugenbuhl, Wheaton, Peck, Rankin & Hubbard

Buying and Selling a Business: Start to FinishNew Orleans, LA, December 9, 2016

Make a List and Check it TwiceAvoid mistakes by maintaining an active due diligence checklist so you don’t make mistakes involving the following issues:• Governing Instruments• Securities Matters• Current Indebtedness• Contracts• Legal Proceedings and Compliance• Employee/Labor Matters• Customers/Suppliers• Financial and Tax Matters• Real Estate• Products and Services• Intellectual Property Rights and Agreements

Governing Instruments

Mistake: Target company isn’t qualified to do business in Texas.

How to Avoid: Remember to obtain all governing instruments, even a list or copies of certificates evidencing the states and countries where the target company is authorized and qualified to do business. Also remember certificates of incorporation and bylaws, minutes, consents, records of stock issuances, and even business plans.

Securities Matters

Mistake: An SEC notification that target company didn’t file registration to sell securities.

How to Avoid: Obtain all security documents from target company during acquisition period, including all permits or other securities law filings for transfer of securities or forms filed to qualify for exemptions, including all correspondence and memoranda related to the filings. Also remember all schedules setting forth issuances of stock, schedules of current record owners of shares of stock, stock options, agreements relating to purchase or sale of securities, any legal opinions given in connection with sale of securities.

Current Indebtedness

Mistake: Receipt of notification of lien enforcement action.

How to Avoid: Obtain a schedule of all liens and encumbrances against the Company’s assets or stock, check all public records for outstanding liens, obtain any agreements confirming available or outstanding lines of credit, obtain a schedule summarizing short-term and long-term debt and obligations of the target company, obtain all agreements securing or relating to outstanding indebtedness of the target company or anyone who the company may serve as guarantor for.

Contracts

Mistake: Third party didn’t consent to assignment of contract and now won’t provide it.

How to Avoid: obtain all material contracts to which the target company is a party and determine whether they can be assigned by buyer, whether third party consent is required, whether there are provisions for change or ownership or control, and whether there are any other limitations in extending those contracts once the target company is acquired.

Legal Proceedings and Compliance

Mistake: Service of a lawsuit and stack of discovery requests.

How to Avoid: Obtain a list of all legal, arbitration, or administrative proceedings or investigations to which the target company is or was a party with all of the related details including pleadings, names of parties and law firms involved, judgments, settlements, correspondence, and any related documentation. Search the public records for any past or present litigation involving the target company or directors of the company. Also obtain all documentation of compliance with all applicable regulations and laws.

Employee/Labor Matters

Mistake: The end company now has 20 people doing the same job.

How to Avoid: Obtain a list of all employees, including job title, location, hire date, and base salary in order to make a plan to merge two existing companies with two groups of employees. Obtain a schedule of compensation paid to officers, directors, and key employees including salary, benefits, bonuses, noncash compensation, and all collective bargaining contracts with any organizations representing employees of the Company. Implement a transition team to integrate the two groups of employees and avoid duplication.

Customers/Suppliers

Mistake: There’s now a conflict between an old customer and a new customer who came with the target company.

How to Avoid: Obtain a schedule of current customers, clients, and suppliers by geography, type of customer, annual revenues, and length of relationship. Review and run conflict checks within the acquiring company to confirm no conflicts or to implement plan to avoid potential conflicts.

Financial and Tax Matters

Mistake: IRS sends an audit notice and there is no documentation to provide.

How to Avoid: Obtain all accountants’ reports, all financial statements, all documentation from the target company’s accountants regarding control systems, methods of accounting, or other financial issues. Obtain all federal and state tax returns for the last three years, all payroll registers, and any other tax information as applicable.

Real Estate

Mistake: Lease for office building expires and doesn’t have renewal option.

How to Avoid: obtain all deeds, leases, and subleases of property and analyze whether they can be assigned to purchasing company, whether certain requirements must be met if target company is acquired in order to maintain leases or other property rights, and implement plan to meet any necessary requirements. If the sale of immovable property/real estate is part of acquisition make sure all documents are in place to transfer the property, including all ancillary documents such as resolutions, tax information, title policies, and other insurance.

Products and Services

Mistake: Notice of product liability suit arrives in the mail.

How to Avoid: obtain a description of all products created, manufactured, licensed, sold, or distributed by target company, and all warranty agreements relating to the products.

Intellectual Property Rights and AgreementsMistake: Receive a cease and desist letter for infringing on a copyright.

How to Avoid: obtain a schedule of all US and foreign copy right registrations and applications, all licenses granted by the Company relating to copyrights, any copyrighted work not owned by the Company but which it is licensed to use; obtain a list of all trademarks/service marks registrations and applications, unregistered trademarks used by the company, and all tradenames used by the company; identify all patented technology or other products owned or used by the Company and all related ownership and license documents, identify any patent of a third party of which the company knows may be or become the subject of a patent infringement claim by the holder of the patent with respect to the company’s products or services.

Benjamin W. Kadden is a Shareholder in the New Orleans office of Lugenbuhl, Wheaton, Peck, Rankin & Hubbard.  Mr. Kadden’s practice focuses upon Bankruptcy, Restructuring, & Creditors’ Rights, Corporate & Commercial Law, Mergers & Acquisitions, and Commercial Litigation.  In connection with his restructuring practice, Mr. Kadden has experience acting as lead Debtor’s counsel, counsel for official committees of unsecured creditors and as counsel for secured lenders.  Mr. Kadden has also actively participated in a number of merger & acquisition transactions pertaining to numerous businesses based in the Gulf Coast, with a focus upon representation of non-public buyers and sellers in equity and asset sales.  Because of his experience in complex Chapter 11 bankruptcy cases, Ben has direct experience and knowledge regarding the purchase or sale of assets by distressed companies, including navigating the process while a buyer or seller is in bankruptcy.

Ben has earned an AV Preeminent Rating by Martindale-Hubbell, and been recognized as a Super Lawyers Rising Star (2014-2016) and Top Lawyer by New Orleans Magazine in Insolvency and Reorganization Law (2014 & 2015).

Stewart F. Peck is a Senior Managing Partner and founding member of Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, with offices in Houston, Texas, New Orleans and Baton Rouge, Louisiana. With 39 years of experience in multiple legal areas, Mr. Peck has handled over 70 reported cases. He has handled significant, complex financing and merger and acquisition transactions and Chapter 11 proceedings. He has been involved with the purchase and sale of numerous businesses. Mr. Peck graduated from Tulane Law School in 1977 where he was elected to the Order of the Coif and was a member of the Tulane Law Review. Mr. Peck graduated with distinction from Kenyon College, Magna Cum Laude, in 1974, where he was a member of Phi Beta Kappa.

Recognized for many accomplishments, Mr. Peck is listed in Chambers USA, Best Lawyers in America, Best Lawyers in New Orleans, and Louisiana Super Lawyers. He was recently named to the 2016 class of New Orleans CityBusiness Leadership in Law.

This presentation authorship was in partnership with Lugenbuhl Associate

Ms. Leslie-Johns Ray.

Top Mistakes Made During an Acquisition - And How to Avoid Them!

Stewart Peck and Benjamin KaddenPartners

Lugenbuhl, Wheaton, Peck, Rankin & Hubbard

601 Poydras Street Suite 2775

New Orleans, LA 70130

Phone: (504) 568-1990 Fax: (504) 310-9195Website: www.lawla.com

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