March 8, 2011
Top-up option guidance
I've written about top-up options before. Now, if you're considering including a top-up option in your next deal, remember to read Olson v Ev3 before you get started. It provides a very good review of the issues related to the use of top-up options and how acquirers can structure them so that they withstand litigation challenges. The court notes just how ubiquitous top-up options have become in recent years:
Not surprisingly, given these advantages, top-up options have become ubiquitous in two-step acquisitions. They appeared in more than 93% of two-step deals during 2007, 100% of two-step deals during 2008, and more than 91% of two-step deals during 2009. [citing Mergermetrics]
The trigger to exercise the top-up option in the Ev3 transaction was 75%. That's a pretty modest - as things go these day - trigger for top-up option. The target might not have had enough authorized stock to allow them to go any lower.
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