X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Embarcadero Technologies, a San Francisco-based data tools provider, agreed to be acquired by a private equity firm for $200 million in a deal that demonstrates the effects of stock option backdating. Last year, as Embarcadero was embroiled in the stock option backdating scandals, its initial deal with Thoma Cressey for about $234 million fell through. “It delayed the deal,” explained Goodwin Procter partner Stephen Ferruolo, who represented Embarcadero. “It was important that we came to grips with the stock options issue.” That meant restating the company’s financials. As of now, the special committee’s review of the stock options is being concluded and the company is hoping to file its 10K in a couple of weeks, he said. “In the current agreement, having the 10K on file was a condition to closing,” he said. Under the recent deal, the company will be purchased by an affiliate of private equity group Thoma Cressey Bravo, which will turn the company into a private entity. The transaction is expected to close during the second quarter, subject to customary conditions, including regulatory approvals and approval by Embarcadero stockholders. From a legal perspective, having a stock options issue in a company’s past can impact the diligence, lawyers say. “The diligence is complicated when you’ve got an options investigation because the other side needs to understand what the parameters are and what the exposure is,” said Charles Ruck, an Orange County-based Latham & Watkins partner. “In all of these deals, you end up with the need to have the investigation at a late enough stage that you can be comfortable that you know how big the problem is.” Latham’s client, a major stockholder, is also a former CEO who left the company about six months ago, which Ruck said brought some interesting dynamics to the deal. The negotiations were also complicated because the client, who owned about 30 percent of the shares, wasn’t privy to the boardroom negotiations because he no longer was on the board. Even so, since he had such a large stake, he was included in the voting agreement. “Most of the times, voting agreements are reserved for people represented in the boardroom,” Ruck said. “But because our client had been the CEO before, and had signed similar agreements the last time the deal was proposed, we agreed.” Latham & Watkins represented the controlling shareholder in the transaction with a team led by Ruck, Orange County associates Timothy Andrews and Bryan Zech, and Los Angeles partner David Schindler. Thoma Cressey was represented by a Chicago-based team from Kirkland & Ellis. Embarcadero Technologies was represented by Goodwin Procter in a team led by San Diego partner Ferruolo and associate Bradley Weber � both of whom had joined from Heller Ehrman about three weeks ago, and brought their client with them.

Kellie Schmitt

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.