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Boston College Law School

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Tuesday, October 2, 2007

Acxiom: DOA

The Acxiom deal was terminated yesterday.  It is the second post-market crisis deal termination after MGIC/Radian and the first private equity one.  In the merger agreement, the maximum damages payable by the buyers in case of breach of the agreement was $111.25 million, although in certain circumstances, such as a falling through of debt financing, the buyers could pay a reduced reverse termination fee of $66.75 million (a similar structure to 3Com -- hmm Wilson Sonsini was counsel for the targets on this deal and 3Com also -- shocking I know).  The fact that the parties agreed that the buyers only needed to pay $65 million to terminate the deal likely reflects the parties assessment of their chances of success in litigation over a material adverse change dispute and the continuing availability of financing for the transaction.  It would also be interesting to know which of the buyers, Silver Lake or ValueAct was driving the termination here.  This is because ValueAct still owns 12.8% of Acxiom; the termination must have particularly hurt them.   But, in any event, Acxiom now begins the hard task of restoring market credibility and proving that it is no longer "damaged goods".  Silver Lake's likely reaction, "best of luck in your endeavors."  The press release follows:

LITTLE ROCK, Ark.--(BUSINESS WIRE)--Acxiom® Corporation (NASDAQ: ACXM; www.acxiom.com) announced today that it has reached an agreement with Silver Lake and ValueAct Capital to terminate the previously announced acquisition of Acxiom by Axio Holdings, LLC, a company controlled by Silver Lake and ValueAct Partners. Acxiom, Silver Lake and ValueAct Partners have signed a settlement agreement pursuant to which Acxiom will receive $65 million in cash to terminate the merger agreement. Charles Morgan, Acxiom Chairman and Company Leader, said, "Acxiom has been an industry leader for over three decades, and we will continue to execute on our long-term strategy to remain the market leader in database marketing, services and data products. While I am disappointed that we could not conclude the merger, we have renewed energy and remain focused and committed to delivering value for our shareholders and clients." About Acxiom Corporation Acxiom Corporation (NASDAQ: ACXM - News) integrates data, services and technology to create and deliver customer and information management solutions for many of the largest, most respected companies in the world. The core components of Acxiom's innovative solutions are Customer Data Integration (CDI) technology, data, database services, IT outsourcing, consulting and analytics, and privacy leadership. Founded in 1969, Acxiom is headquartered in Little Rock, Ark., with locations throughout the United States and Europe, and in Australia, China, and Canada. For more information, visit www.acxiom.com. Acxiom is a registered trademark of Acxiom Corporation.

Addendum:  Acxiom refers to the $111.25 million fee above as a cap on damages.   They do so because it is phrased as a limitation on the maximum amount Acxiom can collect if the buyers breach their agreement and walk.  They argue it is not a reverse termination fee per se because they affirmatively have to sue and prove damages up to the cap to collect on it rather than a notice provision where the buyers need to sue.  In contrast, the $66.75 million is specifically contemplated as a break fee if financing isn't available. 

http://lawprofessors.typepad.com/mergers/2007/10/acxiom-doa.html

Material Adverse Change Clauses, Takeovers | Permalink

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