Two-Step Acquisitions Benefits and Drawbacks

Summary

For most acquisitions of U.S. public companies, a two-step structure offers superior execution compared to a one-step merger. There are many advantages to a two-step approach, the most significant of which is speed. A two-step transaction can close in about five to six weeks, whereas a one-step merger may take two to four months or longer to close. Because a two-step merger can close so quickly, there is less time for impediments to closing (such as competing bids) to arise. The two-step structure is particularly well suited to transactions in which no significant regulatory review is anticipated, and there is no financing condition or reverse break-up fee tied to the failure to obtain financing.