Monday, I had the privilege of moderating a discussion on structuring merger and acquisition transactions that I had organized as part of a continuing legal education program for the Tennessee Bar Association.  Rather than doing the typical comparison/contrast of different business combination structures (with charts, etc.), I organized the hour-long discussion around the banter that corporate/securities and tax folks have in structuring a transaction.  We used the terms of a proposed transaction (an LLC business being acquired by a public corporation) as a jumping-off point.

The idea for the format came from a water cooler conversation–literally–among me (in the role of a corporate/securities lawyer), one of my property lawyer colleagues, and one of my tax lawyer colleagues.  The conversation started with a question my property law colleague had about the conveyance of assets in a merger.   I told him that mergers are not asset conveyance transactions but, rather, statutory transactions that have the effects provided for in the statute, which include a vesting of assets in the surviving corporation.  I told him that I call this "merger magic."  I showed him Section 259(a) of the Delaware General Corporation Law:

When any merger or consolidation shall have become effective under this chapter, . . . all property, real, personal and mixed, and all debts due to any of said constituent corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the corporation surviving or resulting from such merger or consolidation . . . .

We discussed the possibility of an assignment/transfer of assets by operation of law under that provision and more generally under Delaware law in connection with different types of mergers, including recent case law regarding reverse triangular mergers.  Ultimately, my property law colleague decided that a direct merger involved an asset sale by the target entity and a purchase transaction by the surviving corporation, as a matter of property law, notwithstanding my "merger magic" explanation I was forwarding as a descriptor under state corporate law.

The tax guy thought all this (both descriptions of a merger) was balderdash.  These descriptions were too complex and stilted for his taste.  Not to be outdone, he offered that all merger and acquisition transactions are either asset sales or sales of equity.  At least, he allowed, that's how federal income tax law looks at them . . . .  I told him that asset and equity sale transactions are joined by mergers (direct, reverse triangular, and forward triangular) and share exchange transactions (which are also statutory transactions, available in Tennessee and other Model Business Corporation Act states, but not available in Delaware) in the corporate lawyer's business combination toolkit.  I also noted that federal securities law voting and reporting requirements work off these different corporate law descriptors.

Fascinating!  Three lawyers, three different conceptions of business combination transactions.  The moderated discussion on Monday was, in effect, an attempt by me to recreate, albeit in a different form, parts of that conversation.  The discussion was, in my view, decently successful in achieving its limited purpose in the program.  Nevertheless, I really wish I had a transcription of that original conversation by the water cooler.  That was truly priceless . . . .