Drag along rights can be introduced through equity raising or during merger and acquisition negotiations. For example, when a technology start-up opens a Series A investment cycle, ownership of the company is sold to a venture capital firm for capital injection. In this concrete example, the majority stake belongs to the Chief Executive Officer (CEO) of the company, who owns 51% of the company`s shares. The CEO wants to retain control of the majority and protect himself even in the event of a possible sale. To do so, it negotiates a drag-along right with the offer of shares in a venture capital firm and gives it the right to compel the venture capital firm to sell its shares in the company if a buyer ever shows up. A POWER Purchase Agreement is a legal contract between an electricity producer (supplier) and an electricity buyer (buyer, usually an electricity supplier or a large electricity buyer/distributor). Contractual terms can take between 5 and 20 years during which the buyer buys energy and sometimes also capacity and/or ancillary services from the electricity producer. These agreements play a key role in financing assets of own property producing electricity (i.e. not held by a utility company).
The seller under the AAE is usually an independent electricity producer or a “PPI.” In some cases, drag-along rights may be more popular in agreements with private companies. The drag-along rights of privately held shares may also end when a company goes public with a new share offer. As a general rule, the IPO of stock classes will cancel old ownership agreements and, if necessary, create new drag-along rights for future shareholders. Share offers, mergers, acquisitions and acquisitions can be complicated transactions. Certain rights may be included and introduced under the terms of a stock class offer or in a merger or acquisition agreement. While the drag-along rights themselves can be clearly detailed in an agreement, the distinction between the majority and the minority can be something to watch out for. Companies may have different types of stock categories. A company`s statutes refer to the ownership and voting rights of shareholders, which can affect the majority or minority.
In 2019, Bristol-Myers Squibb Company and Celgene Corporation entered into a merger agreement under which Bristol-Myers Squibb acquired Celgene in a cash and equity transaction worth approximately $74 billion. Following the acquisition of Bristol-Myers Squibb, celgene shareholders accounted for 69% of the company`s shares as a result of the merger and the remaining 31%. Celgene`s minority shareholders did not have special options and had to comply with a Bristol-Myers share and $50 for each Celgene share. AAEs can be managed by service providers in the European market. Legal agreements between the national energy sectors (sellers) and the distributor (buyer/purchaser of large quantities of electricity) are treated as AAEs in the energy sector. A new form of PPP has recently been proposed to commercialize electric vehicle charging stations through a bilateral form of electricity purchase contract. A drag-along right is a provision or clause in an agreement that allows a majority shareholder to compel a minority shareholder to sell a business. The majority owner who goes through saturation must give the minority shareholder the same price, conditions and conditions as any other seller.
Power Purchase Agreements (PPAs) may be appropriate: The Rights of the Along Tag differ from drag-along rights, although they have the same underlying focus. It is also possible to find tag along rights in share offers as well as in merger and acquisition contracts.