Is the Merger Mania back?

Actually, no.  But we are seing some indications that strategic buyers are at least tip-toeing back into the mergers and acquisitions market.

For several years, the access to cheap credit provided the liquidity and leverage to fuel the largest acquisitions boom in the past 20 years.  Private equity firms were increasingly able to bid up prices using cheap capital and aggressive capital structures, sidelining many strategic acquirers who needed to justify acquisitions using more traditional models.  With the credit markets drying up in the past 18 months, private equity firms have been forced out of the game, and there is little indication that we’ll see any return of the mania until the credit markets at least return to normal.

However, there are some indications that strategic buyers are gradually stepping up efforts to take out rivals and expand market share, even as share prices have fallen in the past eight months.  Foreign companies are taking advantage of the cheap dollar to acquire US-based rivals, most prominently InBev’s acquisition of Anheuser-Busch - see agreements involving Anheuser-Busch here.  And some US-based companies are also making noise:

• Skechers USA bid on Heelys for less than 15% of what it was priced for just 2 years ago (see many Skechers agreements here), and
• CVS Caremark Corp made an unsolicited bid for Longs Drugs for $3+ billion last week as well.

We’ll be posting these merger agreements alongside our library of millions of legal agreements and clauses from top law firms and the largest companies in the world over the coming weeks.  Of course, we’ll be keeping an eye on the overall market trends on not just the mergers and acquisitions space but also across the many other practice areas we cover.

Searching for Legal Agreement Templates?

Need to quickly find sample language for certain types of agreements?  Or do you already have a template or form agreement, and you need to look across millions of legal documents to find specific language to make the form fit the deal you’re working on?

It may be helpful to check out RealDealDocs.com, which recently added another feature to its legal agreements and contracts preview site.  This feature allows you to quickly browse through, by company name, tens of thousands of agreements and contracts that were drafted by top law firms for some of the largest companies in the world.  Being able to browse and Search Company Agreements enables legal and deal professionals to:

• Dramatically cut research and drafting time
• Gain competitive intelligence about the types of agreements leading companies in particular industries have entered into
• See how these deals are negotiated and drafted, usually by top law firms
• Find out which law firms are working with specific companies

The preview site is helpful because it allows you to kick the tires and see at least partial views for specific agreements.  More powerful free search tools, including the ability to find specific provisions from different types of agreements, are available at the main site, www.RealDealDocs.com.  Bottom line - sites like this give you the ability to save time and money while constructing better deals because you can leverage the work from top law firms across the country and around the world.

Our Joint Venture Agreement experience (so far)

We recently formed a joint venture agreement to be able to populate one of our new web properties with several million legal documents, primarily court filings.  Generally, joint venture agreements are typically entered into by larger companies, not small to mid-sized businesses (SMBEs), but we felt this was the most effective way to accomplish our objectives.  Parenthetically, it also functioned to help us resolve some ownership and IP issues around a product which was developed for us by one of our consulting partners.

I’m sure many of you are familiar with the nature and objectives of a joint venture relationship, as opposed to a strategic alliance.  For those of you who are not, here is a quick review of the basics:

A joint venture is a legal entity formed between two or more parties, where the parties contribute equity and agree to an allocation of ownership and control, as well as the revenues, expenses, and their respective responsibilities and obligations.  The joint venture can be for one specific project only, or it can result in an ongoing business relationship.  This differs from a strategic alliance agreement, which is a much looser relationship involving contractual obligations but no equity stake (you can see lots of strategic alliance agreements here).  I should quickly note that a joint venture may be any legal structure (a corporation, limited liability company, partnership, etc.), the determination of which depends on a number of considerations such as valuation, tax, and liability.

OK, so back to our regularly scheduled programing.  We chose to enter into a joint venture agreement for several reasons:

1. We had a great partner we trusted.  I can’t emphasize how important this is, and I can’t say enough about the quality of the team we are working with.  For us, this relationship represents an important commitment around what we hope becomes one of our major web properties. 
2. The relationship provides an excellent way for us to scale up and leverage each of the parties’ strengths.  While we have outstanding technical and engineering resources, the group we JV’ed with has 10-15 years of experience in acquiring and managing the content that we are using to populate this particular web site.  We have built up a very deep bench of marketing and product development expertise in providing legal information services to the legal and other professional service providers, so it’s a great fit.
3. We were able to clearly identify and allocate resources and responsibilities, and we needed a structure which could help us cleanly allocate intellectual property.
4. We both needed to think about a longer term relationship which would provide appropriate incentives in the form of buyout provisions to make sure that everyone was committed to the deal.

So how’s it going?  Great.  We got off to a bit of a slow start, but we’re turning the product loose in the next 60 days or so, and we’re excited about the prospects.  Stay tuned.

Ten Key Provisions for Independent Contractor Agreements - Part 3 of our Updating

Briefly skipping over the important intellectual property ramifications of utilizing independent contractors rather than employees, I wanted to quickly review some of the important deal terms for independent contractor agreements, which are also available on a fully searchable basis at www.RealDealDocs.com.  I’ve also provided links to some recent independent contractor agreements filed by some public companies, such as this independent contractor agreement from an environmental consulting and technology provider based in Canada in addition to the ones found at the sites above.

It is generally good drafting to include the following terms in independent contractor agreements, particularly if your objective is to preserve independent contractor status rather than an employee relationship:

1.   Who the parties are and what is their intended relationship (i.e., independent contractor status)

2.   The services to be provided

3.   Compensation, the nature and timing of which contributes to the determination of independent contractor status

4.   Reimbursement of expenses

5.   Company’s cooperation obligations

6.   An affirmative representation of independent contractor’s understanding of tax obligations

7.   Ownership of work product, with particular attention to the assignment of intellectual property rights, which under statutory law in the US are automatically held by the independent contractor unless specifically assigned to the Company

8.   Confidentiality / non-disclosure and non-solicitation of employees or customers

9.   Termination provisions (the easier the independent contractor can terminate without penalty, generally the more likely an employee relationship is found)

10.   General provisions, including warranties, governing law provisions, arbitration, notices, survival, severability, assignability, indemnification, etc.

I should also mention that you can search here for specific deal clauses and provisions from independent contractor agreements, or from any other type of agreement for that matter.

Determining Independent Contractor vs. Employee Status - Part 2 of Updating our Independent Contractor Agreements

As I mentioned in a previous post on how we are updating our independent contractor agreements, one of the critical determinants is to figure out whether someone is an employee or an independent contractor.  This is important because it determines a Company’s liability to pay and withhold Federal income tax, social security, Medicare, and Federal unemployment tax, as well as potential liability for state based taxes.

Essentially, the tests to determine whether someone is an employee or an independent contractor come down to an issue of control - the more control the Company exerts over the individual, particularly with regard to how the work gets done and how autonomous the individual is in calling its own shots, the more likely the relationship is going to be seen as an independent contractor relationship.

The IRS breaks these elements of control down into three categories in this helpful guide:

1. “Behavioral Control – Facts that show whether the business has a right to direct and control the individual.”  These factors include the specificity of instructions and training.
2. “Financial Control – Facts that show whether the business has a right to control the business aspects of the worker’s job.”  To me, these factors go to how financially independent the individual is in terms of its ability to operate its business of providing services to the Company.
3. “Type of Relationship – Facts that show the type of relationship,” which include such factors as how long the relationship is intended to last, the written intention of the parties, etc.

In addition to the criteria proposed by the IRS, there are a number of common law criteria used in determining an individual service provider’s status with regard to employment, and individual states have their own guidelines for determining an individual’s status.  For example, see California’s guidelines here.

I’ll discuss some very important issues around intellectual propery ownership for independent contractor relationships in a subsequent post.

6 Tips on the New California Driving Ban on Handheld Cell Phones

Not so new, actually, as they were passed in late 2006, but the new prohibitions for driving while using a handheld cell phone in California take effect July 1, 2008.  Here’s the lowdown on the new California bans on using handheld cell phones while driving:

1)       It’s still OK to talk on the phone, but it must be handsfree to use it while driving.  And yes, holding the phone to dial is allowed.

2)      Amazingly, both text messaging and reviewing emails is not illegal per se.  Of course, to the extent you drive erratically or are involved in an accident, that could still result in citations and/or legal responsibility.  We expect this to be restricted or prohibited in the next 12 months.

3)       Any use of cell phones by those under 18 is banned, whether it is handheld or hands free.

4)       You may use a handheld phone for emergency purposes, but only to make emergency calls to a law enforcement agency, a medical provider, the fire department, or other emergency services agency.

5)       Commercial drivers are exempted from the law.

6)       Using a hand held device is considered a primary violation, so you may be stopped and cited just for this offense.  The prohibition on drivers under 18 using hands free devices is a secondary violation. 

One important legal aspect to take into account is that, while the fine and associated penalties are less than $100 for the first offense, the fact that it is a separate offense means that any negligent or reckless driving while using a handheld device resulting in, for example, a death could be more easily treated as manslaughter by a prosecutor.

You can find the full text of the new laws under California Vehicle Code (VC) §23123 and VC §23124.  If you are interested in other states’ requirements, there is a helpful link from the Insurance Instititute for Highway Safety here.

We have yet to see the new cell phone restrictions hit many companies’ personal vehicle use policies, but if you’d like to see some of them, you can find them under the Vehicles/Driving document type within the Labor & Employment Policies document category at http://www.realdealdocs.com/SearchDocument.aspx.

 

 

Updating your independent contractor agreements template

There is a very wide range of issues you can consider in determining how to structure and draft a consultant / independent contractor relationship.  I’ll be walking through some of these issues in a series of posts over the next several days, but they include:

1. Understand the key differences between independent contractor and employee status.  These include issues ranging from tax withholding responsibilities and worker’s compensation coverage to other general liability issues.
2. Reviewing the particular nuances of intellectual property ownership in an independent contractor relationship.
3. Covering the general contractual elements found in typical independent contractor agreements.

In our business, we like to keep these agreements relatively straightforward, and we rely on templates which cover the key issues.  That said, we’re sticklers in terms of IP assignment and the like, as many venture-backed businesses are.

If you are looking for some outstanding independent contractor agreement samples or templates, I’ve highlighted an excellent resource of documents that were drafted by some of the largest companies and law firms in the country. 

Writing Delaware employment agreements

I recently wrote about new resources for identifying California Employment Agreements to use in your business, or for drafting documents for your clients.  The rationale is clear - negotiating effective employment agreements that are applicable to your jurisdiction is essential to enforcing your rights appropriately.  Additionally, the ability to leverage legal agreements drafted by top law firms enables business owners and lawyers alike to find new ways of constructing deal terms or simply getting documents turned around more quickly.

This of course applies to many state jurisdictions within the United States, not the least of which is the ability to quickly find and browse across thousands of Delaware employment agreements.  These documents are particularly likely to have been drafted by top law firms, as large corporations tend to be disproportionately organized under Delaware law. 

If you need to find Delaware employment agreements using full text search criteria or other tools, such as limiting searches to particular industries, you can do that as well using these employment agreement search tools.

Yahoo’s severance plan - protecting your business or playing dirty?

On Monday, June 2, a Delaware judge unsealed redacted portions of Yahoo’s Change of Control Employee Severance Plan originally filed with the SEC in February. 

For background, the plan was originally enacted in the midst of the Microsoft efforts to acquire Yahoo, which have recently geared up again.  Release of the confidential items shows that the plan, which would have come into play in the event of a qualifying event such as an acquisition by Microsoft, would have added between $500 million to $2.4 billion in acquisition costs to Microsoft.

In defense of Yahoo executives, they laid out a number of rational objectives for enacting the plan, not the least of which is that it would keep large numbers of employees from bailing out at the first opportunity given all the uncertainty around the company’s future.  Shareholders, many of which wanted to increase shareholder value or find an exit due to Yahoo’s struggles over the past several years, have filed suit, alleging among other things that this was an attempt to thwart the acquisition, rather than just protect the company from losing critical employees. 

In balancing these competing interests, it will ultimately come down to how reasonable the plan is.  An easy way to see this is to compare the plan to other Change of Control Agreements and Employee Severance Plans.  You can find thousands of these at www.RealDealDocs.com.

So what do you think - a righteous and reasonable effort to prevent defections, or a nefarious scheme to deter Microsoft and maintain control of the company?

Is Displaying all these Legal Agreements legal and ethical?

I received a call on Thursday from the marketing director of a prestigious law firm about a new feature that was just released on RealDealDocs.com.  I wrote about it last week, but basically it makes it very easy to find legal agreements and contracts from top law firms, including, for example, agreements involving Latham Watkins, Wachtell Litpon agreements, Baker McKenzie contracts, etc.

It seems that an attorney at this marketing director’s firm mentioned that he had seen one of his agreements on a page on our site that highlighted agreements involving his firm, and he was wondering where the contracts came from.

We explained that these were publicly available documents, and that everyone is comfortable with both the legality and the ethics of posting these legal documents.  What makes it interesting is that, for the first time, there are millions of legal documents, including agreements and contracts, located in one place that are so easily searchable across lots of different criteria, including types of agreements, document titles, governing law, law firm, industry, etc., all the way down to the clause search level.

We started talking about the implications on larger law firms’ practices.  Our view is that this is another opportunity to get a firm’s name out in front of an audience of people working on the very deals that these firms specialize in, and it will help those who work to take advantage of this.  In fact, later this summer we plan on doing just that - providing law firms with an opportunity to get involved in contributing additional content, such as firm or practice area profiles, uploading additional documents or templates, etc. to get in front of this audience.

What do you think?