US reporting companies that are planning or have completed a significant acquisition of a business may need to file separate target financial statements and related pro forma financial statements under Rule 3-05 and Article 11 of Regulation S-X. The specific SEC rules and financial reporting obligations triggered by a significant acquisition can be quite complex and challenging, requiring careful evaluation by an acquiring company. These rules may also impact the ability of registrants to access the capital markets in a timely fashion, affecting their ability to register or offer securities, including conducting a securities offering, the proceeds of which would be used to fund a significant acquisition or registering securities to be used as consideration for the acquisition.
This note discusses the SEC's financial reporting and disclosure requirements triggered by a company's significant business acquisition. We outline key concepts and practice pointers to determine if and at what level an acquisition is significant, what and how many years of historical financial statements of the target are required to be included in the registrant's SEC filing or offering document, what related pro forma financial information is required, when and how these target and pro forma financial statements are to be filed or updated, and relevant market practice considerations.
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.