We understand that transaction value is highly sensitive information for many of our clients, and many business owners prefer that the financial terms of a sale remain private and are not publicly disclosed. Sellers often prefer to keep their personal financial information private, especially the fact that they may have just sold their company for a lot of money.

Many aerospace & defense business owners are pleasantly surprised to learn that they often do not need to disclose the price.

Even if you sell your middle market aerospace and defense business to a public company, the purchase price often does not need to be disclosed. In most cases, a public company is only required to disclose the price it paid for your company if the acquisition meets certain “significance tests”, which often do not apply for our clients.

Under Regulation S-X Rule 1-02(w) of the United States Securities Act, there are three primary tests: the investment test, the asset test, and the income test. The investment test compares the acquirer’s investment in the acquired business (including the purchase price and assumed liabilities) to the acquirer’s total assets. The asset test compares the target’s total assets to those of the acquirer, and the income test compares the target’s pre-tax income from continuing operations to that of the acquirer, subject to specific SEC-defined adjustments and alternative measures. If any of these tests exceed the applicable threshold (typically 20%), the acquisition is considered significant and may trigger the requirement for the acquiror to disclose the price they paid to acquire your company (along with additional financial details).

Accordingly, over the past 25 years, most of our clients have sold their companies without the need for the sale price to be disclosed. However, we recommend discussing your specific potential disclosure requirements with your M&A legal counsel at the outset of a sale process, so you fully understand the legal disclosure considerations specific to you.

Have a great day everyone,

Ryan Kirby
Junior Partner