Financial Projection Disclosure Requirements in M&A Deals: Preparing, Using and Disclosing Projections

Financial projections prepared by management and approved by the board of directors are typically a key element considered by a board of directors in evaluating transformative M&A transactions, not least because they underpin the fairness opinion delivered by a financial advisor to the board of directors. If a company’s stockholders will vote on the transaction (e.g., if the company is selling itself or if the company is a buyer and is issuing a number of shares that exceed stock exchange requirements for stockholder approval), these projections are often summarized in the proxy statement sent to stockholders pursuant to state corporate law and federal securities law.

Attorneys that understand the current views of courts and the SEC staff on the use and disclosure of projections at the outset of a transaction are better equipped to help guide clients through the unique projection disclosure issues that can arise during the course of an M&A transction. Missteps in this area can impair a company’s efforts to build a strong record and can in turn increase directors’ and officers’ exposure to fiduciary duty breach claims in stockholder litigation that often arises in M&A transactions.

Listen as our panel of M&A attorneys discusses best practices for preparing, using and disclosing financial projections in M&A deals, highlighting recent key legal developments.