A merger proxy statement is prepared by a public company in connection with an acquisition that shareholders are required to vote on. Extensive disclosures about the merger transaction are mandated by the proxy rules under federal securities law so that shareholders can make an informed voting decision.

The proxy rules under the Securities Exchange Act of 1934 (the Exchange Act) govern public mergers. The proxy rules and requirements for the solicitation of proxies are primarily contained in Regulation 14A of the Exchange Act. Pursuant to Rule 14a-3(a) of the Exchange Act, a public company must deliver a proxy statement to its shareholders prior to soliciting proxies in connection with a meeting of shareholders.

The proxy statement is filed with the Securities and Exchange Commission (SEC) on a Schedule 14A. A preliminary proxy statement, also known as a PREM14A filing, is typically filed a couple weeks after a deal announcement. The SEC will then review the proxy statement and provide a comment letter to the company. The company will be required to promptly prepare a response letter for the SEC and amend its proxy statement disclosure as applicable. Eventually the company will file a definitive proxy statement, also called a DEFM14A filing.

A merger proxy statement is composed of a number of standard sections including:

• Letter to Shareholders
• Notice of Special Meeting of Shareholders
• Summary
• Questions and Answers
• Special Factors
• The Special Meeting
• Terms of the Merger Agreement
• Forward-Looking Statements
• Proposals
• Security Ownership of Certain Beneficial Owners and Management
• Appraisal Rights
• Householding Information
• Where You Can Find More Information

The “Summary” section is also known as the “Box” since these pages of disclosure typically have a box around them. It will provide basic details about the merger structure, the parties involved, the merger consideration being paid, the board’s recommendation and reasons for the merger, a summary of the fairness opinion delivered by the company’s financial advisor with respect to the fairness of merger, the proposals relating to the merger that shareholders will need to vote on, details about the special meeting of shareholders, and voting instructions.

Within the “Special Factors” section, the “Background of the Merger” subsection provides an extensive chronology about the events and discussions leading up to the decision to pursue a merger. This subsection will typically describe the process used by the board and management to evaluate potential strategic transactions or opportunities, as well as other parties contemplated for a merger transaction.

The “Special Factors” section of the merger proxy statement will also include financial projections that were prepared in connection with the company’s evaluation of strategic transactions, including the merger. The description will include a number of legal disclaimers that the financial projections were based on a number of assumptions and variables that are inherently subject to uncertainty.

The merger proxy statement will also disclose information about any potential conflicts of interest. This is intended to make shareholders aware of potential interests that the company’s directors and executive officers have in the merger transaction ahead of the shareholder vote. This disclosure is typically contained under a subsection entitled “Interests of the Directors and Executive Officers in the Merger.” Such interests may include entitlements to receive retention bonuses, the conversion of equity awards into cash payments, and continued indemnification and insurance coverage provided to directors and executive officers.