Preparing for a Change in Control

May 1, 2006

1 Min Read
Preparing for a Change in Control

Originally Published MX May/June 2006

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

A medical device company with 300 employees and annual revenue of $100 million was not having much success with direct sales of its products, nor was it having luck in signing up strategic marketing partners.

Consequently, the board of directors decided to explore its strategic alternatives.

At the time the board decided to investigate selling the company, only two of the company's executives, the CEO and CFO, had change-of-control agreements in place. The company recognized that it was critical to have formal change-of-control agreements in place before potential acquirers conducted their due diligence, otherwise the company would lose negotiating leverage.

The company commissioned a review of competitive market practices regarding change-of-control programs for executives and retention packages for key employees. The evaluation, conducted by reviewing publicly available documents, was based on the change-of-control and retention programs at a relevant peer group of 20 similarly sized medical device companies. Based on recommendations stemming from this evaluation, the company formulated change-of-control agreements for nine executives. Ten nonexecutive employees were eligible for a custom retention program.

The company was sold six months after the change-of-control and retention programs were initiated.

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