Strafford Publications Webinar: PPP Financing in M&A Transactions

Finance partners Matthew Edward Schernecke and Andrew Budreika, and Corporate Business Transactions associate Andrew Rocks presented in a Strafford live webinar, "PPP Financing in M&A Transactions." The Paycheck Protection Program (PPP) and other CARES Act loan programs implemented in response to the COVID-19 pandemic have various implications on pending and potential M&A transactions. The unique features of the PPP loans in particular and the volume of such loans in the marketplace have resulted in novel issues for M&A practitioners.

During this 90-minute program, the panel provided an overview of the factors to consider in structuring, negotiating, and executing an M&A deal involving a PPP loan. The panel also discussed key issues such as how to treat an outstanding PPP loan balance in a transaction, issues regarding loan forgiveness, and the importance of evaluating and addressing risk regarding a target borrower's compliance with PPP loan terms.

Other key considerations that were addressed include:

• What have we learned so far in negotiating around these PPP loans?
• When is the lender's and/or SBA's consent to the acquisition of a PPP borrower required, and what is the process for obtaining such approval?
• What conditions must be met and what actions need to be taken to take advantage of the safe harbor from the prior SBA approval requirement (if applicable)?
• How should buyers and sellers approach transaction structuring to preserve the value of potential forgiveness of the PPP loan in the context of an M&A transaction?
• How should buyers conduct due diligence concerning a PPP loan and structure contractual recourse, including representations and warranties and indemnities, to both mitigate compliance risk and preserve the value attributable to forgiveness?