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California Business, Insurance And Environmental Law Blog

Teem purchased for $100 million by WeWork

Those who live and work in California may be familiar with a company called WeWork. It has been around for about eight years and is estimated to be worth $35 billion. The company just acquired a business called Teem for $100 million in cash. Teem and WeWork have many of the same customers, and the acquisition is said to help WeWork create flashier tools for its clients.

The merger was also believed to have occurred so that WeWork could diversify its product offering. It is trying to evolve into a software company as much as it is a provider of work spaces for other organizations. Teem has been around for six years and is based in Salt Lake City. It is believed that the company will continue to operate independently.

Follow these tips to choose the best business partner

If you come to realize that a partnership is the best type of business for you, it's time to make a short list of candidates. Even if you have a clear idea of whom you want to go into business with, don't get too far ahead of yourself. This is a big decision that requires attention to detail.

There are several tips you can follow to ensure yourself of choosing the best business partner. This doesn't guarantee long-term success, but it definitely helps. Here are five tips to keep in mind:

  • Try a trial period: Before you dive in head first, work together for a few weeks or months to get a better feel for each other. Maybe you find that you're a match made in heaven. Or maybe you come to realize that the person would not make a good partner.
  • Search for someone with the same values: This doesn't mean you should find a partner who has all the same thoughts as you, but similar values will go a long way in making for a more sustainable relationship.
  • Talk about responsibilities: You should never jump into a partnership before you clearly outline who is responsible for what. If you neglect to do so, leaving too much up for interpretation, it could result in disagreements in the future.
  • Pick someone you enjoy spending time with: Yes, you have to be a match in regard to your approach to business, but you also want to select a partner you get along with in a personal sense.
  • Create a contract: Even if you're best friends with someone, you should still have a contract that governs the partnership. Without this, any disagreement could turn into something much more serious than it needs to be.

Talos Energy expands Gulf oil assets with acquisition of Whistler

Energy producers drilling in the Gulf of Mexico contribute to the energy needs of California. One of those producers, Talos Energy Inc., has completed a deal to acquire Whistler Energy II, LLC, which will significantly expand its access to future reserves of oil and gas. For a purchase price of $52 million, Talos gained Whistler's annual production of 1,900 barrels of oil equivalent per day.

The financial details of the transaction included the release of roughly $77 million of cash collateral previously securing surety bonds for Whistler. Talos collected $31 million and Whistler received the other $46 million.

FCC needs more time to review telecommunications merger

California residents who follow the technology and communication sectors are likely aware that the telecommunication giants T-Mobile and Sprint have announced a proposed merger. Consumer rights groups have voiced concerns about the deal and the impact that it could have on wireless service costs, and the Federal Communications Commission said on Sept. 11 that it needs more time to review the merger to determine whether or not these arguments have merit.

The heads of both Sprint and T-Mobile are on record as saying that consumers would benefit if the two companies joined. They say that the merger would lead to lower prices for consumers and more competition in an area of crucial economic importance. The executives also claim that they need the deal in order to roll out the latest 5G wireless service.

Issues that cause VCs to say no to funding start-up companies

The entrepreneurial ambitions of business people in California often depend on venture capitalists and VC firms investing in start-up companies. Entrepreneurs typically strive to make their best cases when asking for money, but their efforts might be sabotaged by overlooked issues or even rivalries among VCs that are beyond their control.

A capitalization table represents a spreadsheet record of a company's previous financing rounds. While problems with this information might turn off an otherwise interested VC, an entrepreneur could take steps to improve the appeal of a cap table. Updating the document prior to every meeting could provide potential investors with a complete picture. It should display all funding rounds and equity grants. Employees also need to be on a vesting schedule and the cap table needs to account for anyone who has equity. Existing ownership issues might be more difficult to correct. A VC, for example, will not want to see someone who received an excessive share of a company after a small investment.

Some businesses may change structure after tax reforms

As California businesses grow after their formation, they may find that they want to change their type of corporate registration. The Tax Cuts and Jobs Act, passed in December 2017, made it a profitable choice for many S corporations to become C corporations instead. The tax reform bill cut the highest tax rate for C corporations from 35 to 21 percent. In addition, pass-through businesses like S corporations also received a limited 20 percent tax deduction. In order to change from an S corporation to a C corporation, a majority of shareholders must consent to the change.

Different types of corporations may require different types of accounting. For example, some S corporations that become C corporations must change from an overall cash accounting to an overall accrual method of accounting. In the first six-year period after the change, the Internal Revenue Service said that it can handle the ensuing adjustments ratably during this time. The same is true for corporations that would be allowed to continue to use the cash method; if they switch to the accrual method, they can account the adjustment over the ensuing six years.

Cybersecurity risks increase during mergers and acquisitions

Companies in California engaged in mergers and acquisitions always have many details to sort through to complete the transactions. Cybersecurity represents an issue that cannot be overlooked. A data breach could produce significant liabilities and drive down the asking price for a business. In addition to looking for a history of cyber attacks, a company must manage risks arising from inside threats and the difficulty of drawing together technological platforms.

Once a merger is in progress, employees might fear for their jobs, and their resentment could introduce cybersecurity threats. They might steal intellectual property or allow data breaches to occur. Tools meant to manage access to data and create clear data trails about activity could prevent attacks or neglect by internal workers. A strong training program that informs all employees about the importance of cybersecurity could defend company systems as well.

Proposed California construction leads to environmental lawsuit

A group of California citizens has taken the state to court over the construction of a new bridge. The litigation over the enforcement of the state's environmental law could have an impact on businesses throughout the Golden State.

On Aug. 1, 2018, a nonprofit group filed a lawsuit against Caltrans, the California Department of Transportation, that asks the court to stop the state's planned removal of a historic bridge and the construction of a new span in Point Reyes Station until other options are considered. The lawsuit alleges that the state's plans violate both the California Environmental Quality Act, commonly known as CEQA, and federal environmental compliance law.

Are you ready to formally establish your business?

Formally establishing a business is an important step that you should never approach casually, at least not if you hope to see your business venture succeed. While businesses may develop any number of ways, once it is time to take the idea "out of the basement," it is always wise to make sure that you understand all the steps you must take to found the business properly and legally — or else you may create costly complications in the future and miss out on opportunities that could make or break your business dreams.

In many ways, forming a business is similar to getting married. Technically speaking, it's easy to set up a business, just as it is often quite easy to marry someone, at least legally. However, if all the parties involved do not have a clear understanding of the responsibilities, advantages and risks of marriage or business, they are much more likely to see the whole thing end in disaster. And, like marriage, it is often much more costly and difficult to get out of a failing or poorly conceived business than get into one.

Grocery and pharmacy chains' merger falls apart

For California companies of all sizes, mergers and acquisitions can be an important way to grow the business and expand. However, one high-profile national merger between two retail chains was suddenly cancelled in August after a previous announcement and scheduled shareholder votes. Supermarket chain Albertsons and pharmacy retailer Rite-Aid were to come together in the deal, called off the day before Rite-Aid shareholders were to vote on the proposed agreement.

After the merger announcement and prior to its cancellation, some Rite-Aid stockholders had declared doubts about the value of the deal and stated that they believed Albertsons' management was enriching itself excessively. Other prominent investors noted their votes in opposition. Both companies are brick-and-mortar retailers with strong market positions in their geographic areas, but both are facing increasing challenges due to the rise of online sales. While pharmacy and grocery have been two of the later aspects of retail to be impacted, online delivery has been on the rise, especially after Amazon's 2017 purchase of Whole Foods. The Amazon acquisition has indicated to many industry experts that consumers may move more and more toward online grocery shopping.

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