Business and Law Society Jewish Law Students Association Career Services Monday, March 28, 2011 Ana nato tomy my of of an an In Inte tern rnat atio ional nal B Bus usin iness ess Tr Tran ansa sacti ction on by Barry Levenfeld Barry Levenfeld, barry@arnon.co.il 1
Se Select cted ed Recent t M&A &A T Transac action ons Barry Levenfeld, barry@arnon.co.il 2
Se Selecte cted d Re Recent t M&A &A Tr Transac actions ons (cont.) t.) Barry Levenfeld, barry@arnon.co.il 3
Ou Outlin line of Pr Presenta ntatio tion Practicing Law in Israel The Deere-Plastro Acquisition Barry Levenfeld, barry@arnon.co.il 4
Lesso sons ns of 25 25 Ye Years of Pr Practici icing ng Hi Hi-Te Tech ch Law w in Isra rael el “Silicon Valley” practices have been adapted to the Israeli legal and business environment Corporate, tax and other fields of law have been revised slowly and steadily to level the playing field Local legal and accounting professions have grown increasingly sophisticated Barry Levenfeld, barry@arnon.co.il
Th Then and Now Then Now Currency Controls Complex and Byzantine Gone! Stamp Tax Gone! Inefficient, complex and sometime costly No – only share purchase YES, like in the U.S. Acquisition by Reverse Triangular Merger Tax Free Reorganizations Very few Better, but not as good a the U.S. No Yes Capital Gains Treatment for Founders Shares and ESOP Yes No Capital Gains Tax on Foreign Investors No Capital Gains Treatment for VC Yes, subject to Carried Interest certain rules Barry Levenfeld, barry@arnon.co.il
Corpor orate ate Law In general, Israeli companies “look and feel” like US corporations (shareholders, directors, officers) New Companies Law adopted in 2000 leans more towards Delaware, less towards the UK (replaced England’s 1929 Companies Act!) Enables acquisitions by reverse triangular merger (key to modern company acquisitions) Israeli companies regularly go public in the U.S. Israeli companies can go bankrupt (vital for a thriving hi tech industry) Septe mber Barry Levenfeld, barry@arnon.co.il 1, 2010 Slide no. 7
St Start-Up p Companies es Dramatic reduction in capital gains tax rate on founders’ shares (creates tremendous incentive; no more complex tax planning) Employee Stock Options Plans (taxed at capital gains rates, and only upon exercise – key to incentivizing employees) Articles of Association (equivalent to Certificate of Incorporation in the US) can accommodate standard venture capital provisions ◦ Liquidation Preference ◦ Anti-dilution Protection ◦ Minority Shareholder protections ◦ Drag-Alongs, Co-Sales, ROFRs Septe mber Barry Levenfeld, barry@arnon.co.il 1, 2010 Slide no. 8
Dee eere- Pla lastro tro Acqu quis isition ition The Parties The Transaction The Crises Special Kibbutz Requirements Cross Cultural Issues Barry Levenfeld, barry@arnon.co.il 9
De Deere ere & Co & Company pany Established 1837 Traded on NYSE Over 55,000 employees in 27 countries $39 billion market cap Barry Levenfeld, barry@arnon.co.il 10
Pl Plas astro tro Irrigatio gation n Ind ndus ustr tries ies Lt Ltd. d. Established 2000 Traded on TASE Over 250 employees in 10 countries $250 million market cap Barry Levenfeld, barry@arnon.co.il 11
Ki Kibb bbut utz z Gv Gvat at Established 1926 Agricultural Communal Settlement 700 members Dairy, poultry, olive, cotton and more Barry Levenfeld, barry@arnon.co.il 12
saction Th The e Tr Tran ansaction Acquire 100% of Plastro Irrigation Buy Out the Public Buy Out the Private Owners Long Term Arrangements with Kibbutz Barry Levenfeld, barry@arnon.co.il 13
isis Th The e RO ROFR FR Cr Crisis Deere in preliminary stages of negotiations ROFR comes out of nowhere Kibbutz needs $25 million Deere advances a loan ◦ Currency risks Barry Levenfeld, barry@arnon.co.il 14
Bu Buying ying Ou Out t th the e Pu Publ blic ic Sections 350 and 351 of Companies Law Multiple Securities Held by Public ◦ Shares ◦ Options ◦ Convertible Debentures Need Class Approvals – 75% each Fairness Issues ◦ Kibbutz Arrangements ◦ Fairness Opinion Barry Levenfeld, barry@arnon.co.il 15
Cou ourt t App pprov oved ed Pla lan n Of f Arran ange gement ment Companies may adopt a “Plan of Arrangement” which is basically a court-approved merger Application made to the District Court to convene a meeting of Target’s shareholders. Transaction must be approved by the shareholders (and possibly the creditors) Vote required is 51% of the voters that are present and that represent 75% of shares present (for each class) Court must then approve the transaction and find it to be fair - can be used under Section 3(a)(10) of 1933 Act Barry Levenfeld, barry@arnon.co.il 16
When you need a “Plan of Arrangement”? Where stock is used as consideration Where different consideration is provided to different classes of shares In “going private” transactions or any transaction where some shareholders remain in the company Anywhere the statutory merger might not be available Barry Levenfeld, barry@arnon.co.il 17
De Dealing aling wi with th th the e Ki Kibbutz bbutz Not just purely commercial considerations Needed to fund pension for elderly members ◦ Younger members leave the Kibbutz, leaving the old behind Convoluted Decision Making Process ◦ The death of Yossi ◦ Voting Booths ◦ The Visit of Deere Barry Levenfeld, barry@arnon.co.il 18
Sp Special ecial Ki Kibb bbutz utz De Demands ands Long Term Lease Long Term Manpower Supply Agreement Management Agreement Big Issues: ◦ Is this “disguised consideration” ◦ How to disentangle the business from the members Barry Levenfeld, barry@arnon.co.il 19
Cr Cross oss Cu Cultural tural Is Issues ues Holocaust Memorial Day “Don’t Worry – It will all work out” Example – Labor Law ◦ Day of Rest ◦ Privacy Protection Barry Levenfeld, barry@arnon.co.il 20
Con onclusio lusion Beware: what looks like a straightforward Delaware deal may involved Israeli complications Identifying and dealing with the Israeli issues early on will save time and aggravation Involve appropriate Israeli counsel early – and you can keep Israel obstacles to a minimum, saving time and money for your client Barry Levenfeld, barry@arnon.co.il 21
Th Thank k Yo You! Barry Levenfeld, barry@arnon.co.il 22
Ba Barry y Levenfe nfeld ld Harvard College, AB 1976; Harvard Law School, JD 1979 Made aliyah in 1983 Senior Partner in Yigal Arnon & Co.’s Technology Practice Group International clients include France Telecom, Oracle, Deere & Company, Sun Microsystems, IBM, Symantec, Polycom, Spansion, Boston Scientific Representation of venture funds, technology start- ups, IPO’s of Israeli companies, and technology M&A transactions Senior Lecturer, Hebrew University Law Faculty, in high tech corporate finance Barry Levenfeld, barry@arnon.co.il 23
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