I really like the Latham & Watkins “Guide to Acquired Business Financial Statements.” It provides a concise overview of the SEC’s acquired company financial statement requirements. The guide walks through the amended rules, and describes the various scenarios under which a buyer would be required to include financial statements of an acquired business in a Securities Act registration statement. The guide also addresses the timing of those financial statements and the number of years they’ll have to cover. This excerpt summarizes the general acquired company financial statement requirements:
Your prospectus must include (or incorporate by reference) financial statements for a significant acquisition of a business that has closed 75 days or more before the offering. Significant means above 20% on any of the three tests described below. The 75-day grace period does not apply for recently closed acquisitions above the 50% significance level, so financial statements will generally be required. For probable (not yet closed) acquisitions below the 50% significance level, financial statements will not be needed; by contrast, above 50% they will generally be needed. In every case where target financial statements are required, you will also need pro forma financial information.
The guide also reviews the applicable pro forma requirements for acquisitions and provides guidance on issues that apply to selected types of issuers and industries.
-John Jenkins, DealLawyers.com October 21, 2020
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