Tag archives: drag-along

Threading the Needle: Drag-Along Clauses and Asset Deals

While continued economic uncertainty has dampened M&A activity in the past months, the transition from crisis management to recovery mode in the short to medium term will likely see many companies explore potential divestitures in an effort to dispose of underperforming assets, to increase cash on hand and business resiliency and to mitigate risk.

When seeking approval for divestitures, many companies that have a shareholders’ agreement in place rely on drag-along provisions contained therein to quickly approve the transaction. However, in the context of an asset sale, the applicability of a drag-along is not always clear and both sellers and … Continue Reading

Common liquidity rights in private equity investments in early stage companies

Early stage companies face an uphill climb in growing their business and ensuring their viability going forward. Private equity firms can provide capital as well as significant operational and transactional expertise to aid in a company’s growth. However, private equity investors often intend to exit any investment within a defined time period. As a result, private equity investors frequently demand concessions prior to investment to avoid exposure to liquidity risk. Common liquidity mechanisms sought by private equity investors include drag-along rights, and registration rights.

Drag-along rights and tag-along rights 

Private equity investors will frequently attempt to negotiate the inclusion of … Continue Reading

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