Challenge

Large Spanish public life sciences company wanted to expand into the U.S. market by acquiring an emerging U.S.-based pharmaceuticals company, and needed to close the transaction before the end of the then-current calendar quarter. Client required a deal structure that insulated Spanish parent from adverse international tax and corporate risks, and left the post-closing entity with a robust development pipeline and significant revenue growth opportunities. An AGG team led by Michael Burke ‘translated’ the US common-law approach to corporate law and cross-border transactions into the Spanish civil-law approach to which the client was familiar, and guided the client through the steps needed to create a tax-efficient transaction structure while protecting its corporate interests. If all economic targets are satisfied, the cumulative transaction value would be in the low nine figures.

Approach

AGG started by analyzing, with the client, what the client wanted its U.S. market presence to be over the near and medium terms, and built much of the transaction structure and goals on that outlook. Given the timing and the client’s risk tolerance, we knew that a traditional approach to a stock purchase agreement would not be workable. In order to minimize the risk of adverse U.S. tax consequences on the Spanish parent, we used a deal structure that ring-fenced U.S. business operations from non-U.S. business operations. We worked with the target company—a classic emerging company—to identify and mitigate the risks to the client as well as to the target’s post-closing operations. As part of the transaction documents, we developed a complex set of options and earn-out targets that aligned client’s economic interest with that of the target company and its founders, and left all parties with a ‘win-win’ opportunity.

Result

Client closed the investment on-time, and now has a solid U.S. presence and may consider follow-on transactions. By providing practical, business-focused advice, we were able to meet the client’s aggressive timeline. The client now has a U.S. affiliate with a positive revenue growth outlook. Upon closing, the client emailed to say “I express my thanks and congratulations for the excellent work you have done. Your availability and proactivity was full at all times and the quality of advice, excellent. Please, extend the congratulations to the other colleagues who have worked on the process.”