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Midstream Oil & Gas Equity Acquisitions Toolkit
Practical Law Toolkit w-032-8362 (Approx. 13 pages)
Midstream Oil & Gas Equity Acquisitions Toolkit
by Practical Law Oil & Gas
| Maintained • USA (National/Federal) |
A selection of resources to assist counsel in an equity acquisition of private midstream oil & gas business.
An equity acquisition is beneficial for a buyer wanting to buy a company as a going concern. However, there is less flexibility in an equity acquisition than in an asset acquisition where the buyer can select the assets and liabilities of the target company it wants to acquire. The buyer also risks assuming unknown or undisclosed liabilities of the target company in an equity acquisition, though certain actions may help limit the effects of those liabilities. For instance, the buyer can maintain the target company as a separate subsidiary or negotiate certain contractual protections, such as indemnities, into the equity purchase agreement.
Equity acquisitions are relatively straightforward transactions. Equity acquisitions usually have fewer formalities and documents than asset acquisitions, and are generally simpler than merger transactions. The nature of midstream oil & gas assets often serves to make an equity acquisition of a midstream business an attractive acquisition structure because a midstream business:
- May have critical long-term commercial agreements that require a third-party's consent to assign the contract (such as gathering or processing agreements). In an equity acquisition, third-party consents may be required less often, although third-party consents may still be required for contracts that have a change-of-control provision.
- Often has multiple real property assets that may consist of owned real property, leased real property, easements, or a combination of these. In an equity acquisition, separate transfer documents such as deeds, lease assignment and assumption agreements, and easement assignment and assumption agreements are not necessary.
- May have various permits needed to operate the business, some of which may not be transferable. In an equity acquisition, permits generally do not need to be transferred.
This Toolkit contains continuously maintained resources to help counsel manage the transaction from preliminary planning through the negotiation of the purchase agreement and closing of the transaction. While many of these resources do not specifically address midstream acquisitions or issues, they are intended to be generally useful and relevant.
Some of the resources in this Toolkit address the acquisition of the stock of a corporation, and some of the resources address the acquisition of membership interests in a limited liability company. Although there are key differences between stock and membership interest acquisitions, with the exception of tax matters, much of the information and language in the resources listed in this Toolkit is generally applicable to both types of acquisitions and can be adapted and applied to each type of acquisition.