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Remaining or Going Private: Traditional and New Rationales
The going private transaction has been popular in the past and will likely continue in popularity, given the number of startup “exits.” In the alternative, companies could continue to remain private, as venture capital funding and mega-rounds give companies a way to operate privately and their founders to retain control. Traditional rationales were centered around public speculation and filing or disclosure requirements. I suggest that new rationales include control by founder/CEOs, although it is hard to be sure. In the future, there could be new trends, less founder-centric companies, and more rationales for remaining, or going, private.
A New Trend in Securities Fraud: Punishing People Who Do Bad Things
This article seeks to articulate a distinct view of federal securities law as it is increasingly used in non-traditional enforcement actions commenced to punish corporate bad behavior. This paper argues that these non-traditional enforcement mechanisms should be viewed with skepticism. This skepticism should not be misinterpreted as cynicism, as the author believes that these non-traditional enforcement actions are beneficial vehicles to accomplish the admirable governmental objective of “punishing people who do bad things.” However, the author recognizes that such use of securities law does not fall into a category of clearly defined criminal law and carries a significant risk of abuse. The author also recognizes the “admirable governmental objective” may be thwarted when it comes to private companies. Finally, the author is uneasy with the societal values conveyed when the government sanctions corporate misbehavior in the name of protecting shareholders from deception.
Who Is (or Are) Your Client(s)? Representation of the Entity and Majority Equity Holder in a Business Transactional Setting
Lawyers are always (or almost always) involved in documenting fundamental transactions for smaller businesses and the number of these transactions is increasing over time. Think of sales of businesses, mergers, changes of control and/or redemptions of equity as fundamental transactions. It is difficult to come by actual data on the number or dollar value of sales of U.S. businesses valued at $50 million or less. However, we know from surveys of business brokers that the deal volume they were experiencing in Q3 of 2021 had rebounded to slightly above pre-pandemic levels and that the multiples of EBITDA which sellers were commanding was being maintained in smaller value deals and going up slightly in larger value deals. The multiples of EBITDA commanded by sellers increase as the size of the business being sold increases. Transactions involving these smaller businesses typically involve a single lawyer or a team of 2-3 lawyers in a single firm on each “side” of the transaction. While a larger transaction may provide more opportunity for a law firm to only represent the entity while other law firms represent the board or the majority equity holder, the seller’s legal team in a smaller transaction prepares the documentation and may represent both the majority (or sole)equity holder who makes the decision to sell as well as the business entity being sold.