A Review On The Buyers ' Ownership Financing Risk, Neiman 's Bankers At Goldman Sachs Stearns
792 Words4 Pages
Instead, the buyers’ only notable out would be a tightly drafted material adverse change (“MAC”) clause - and the buyers were well aware that the threshold for adverse events to qualify as a MAC is extremely high in Delaware courts.60
Why would bidders as sophisticated as TPG and Warburg agree to terms that seem so skewed towards the sellers? In their own words, they were “very comfortable with the process.”61 They negotiated MAC clauses with the banks providing debt financing that mirrored almost perfectly the MAC clause in the sales agreement, so they were “very confident that their banks would show up.”62 Second, Neiman was negotiating from a position of strength: it was a highly-respected company and there was significant interest in the auction. In short, TPG/Warburg really wanted the company and believed that they would be able to close the transaction, so they were willing to accept fairly restrictive deal protections. Finally, to mitigate the buyers’ financing risk, Neiman’s bankers at Goldman Sachs offered potential buyers “stapled financing” for the deal.63 This creates for buyers a convenient negotiation floor vis-à-vis other potential *248 sources of leverage, because their financing is guaranteed.64 Moreover, stapled financing may enable buyers to bid more boldly by guaranteeing the availability of financing on certain terms.
3. Being in the Right Place at the Right Time.
There are a number of intangible factors that facilitated this particular deal and may, in