There’s an old saying, probably at some point attributed to Abraham Lincoln or Einstein, that a bridge shows no allegiance to either side. It’s a wonderful metaphor and one that dealmakers would be wise to remember when working to construct agreements to solve for divergent views on value. What two […]
On December 14, 2017, the Delaware Supreme Court reversed and remanded the Court of Chancery’s appraisal of the fair value of Dell Inc. The trial court’s 2016 ruling, which found that a $25 billion management-led buyout undervalued the computer giant by about $7 billion, sent shock waves across the M&A landscape […]
As concerns over the potential exercise of appraisal rights are increasingly being factored into deal price, data points from recent Delaware appraisal decisions may help inform a party of its appraisal risks and, if an appraisal claim is filed, may also be useful in deciding whether to settle the claim […]
We keep a close eye on developing cases regarding earn-outs and contingent payment rights in light of the prevalent use of these arrangements in life sciences deals and their increasing use in non-life sciences deals. On September 8, 2016, a federal court in New York declined to dismiss a claim […]
Court Gives Energy Transfer the Right to Walk Based on its Counsel’s Inability to Deliver the Required Tax Opinion
In a rare decision involving unusual facts, the Delaware Court of Chancery held that a buyer (Energy Transfer Equity, L.P.) had the right to terminate a signed merger agreement with its target (The Williams Companies, Inc.) that Energy Transfer no longer wished to close due to the unexpected decline in […]
Yesterday, in In re: Walgreen Co., the 7th Circuit Court of Appeals rejected a “disclosure-only settlement” involving Walgreen Co.’s 2014 purchase of Alliance Boots and the combined company’s subsequent reorganization. In a strongly-worded but divided opinion, the Court reversed the district court’s ruling, which approved (albeit reluctantly) the disclosure settlement […]
Section 262 of the DGCL provides a statutory remedy for stockholders who do not vote in favor of certain M&A transactions (generally cash mergers) to petition the corporation to buy their stock at a price equivalent to the “fair value” of the stock, subject to compliance with certain procedures. A […]
The treatment of outstanding stock options and other equity compensation awards is often a key element of a sale transaction. Because stock options can represent considerable value, how they are treated can have a significant impact on the company’s management team and employees. For the parties negotiating the transaction, it can […]
The Delaware Supreme Court issued an Order this week in OptimisCorp v. Waite that could have implications for VC-backed or other companies with so-called “block-holder” directors – or directors who are appointed by a stockholder with a large block of shares – in the context of corporate turmoil where management, […]
On December 23, 2015, the Delaware Supreme Court held that SIGA Technologies, Inc. cannot avoid paying $113 million in expectation damages (plus interest) to PharmAthene, Inc. for breaching an express agreement to negotiate a strategic license in good faith in accordance with terms set forth in a term sheet. The […]
Shortly before Christmas, the UK Supreme Court issued a judgment that provides important guidance on the legal test for assessing the circumstances in which UK merger control rules apply to the acquisition of business assets.
After over seven years of litigation, the Delaware Supreme Court on December 11, 2015 upheld the Court of Chancery’s important decision in Nine Systems, which held that a 2002 recapitalization of a streaming media start-up unfairly diluted the minority stockholders when VC-backed directors failed to include the stockholders in an emergency round of financing […]
Two recent cases in the M&A space regarding earn-outs make one thing clear: express language in the definitive agreement prevails over any implied covenant of good faith and fair dealing. Fortis Advisors LLC v. Dialog Semiconductor PLC (Del. Ch. January 30, 2015) (granting a buyer’s motion to dismiss a claim […]
On November 30, 2015, in RBC Capital Markets, LLC v. Jervis (C.A. No. 6350-VCL) the Delaware Supreme Court upheld the principal rulings finding financial advisor RBC Capital Markets, LLC liable for approximately $76 million in damages for aiding and abetting breaches of fiduciary duties by former directors of Rural/Metro Corporation in connection […]
In our January 2015 newsletter we discussed the recent decision of the Delaware Court of Chancery in the Cigna Health & Life Company v. Audax Health Solutions, Inc. case, which invalidated two purchaser-imposed requirements that are frequently found in private company mergers, specifically the conditioning of payment of merger consideration on […]
In the last few years, there have been numerous developments in the law and practice surrounding appraisal rights under Delaware law.
A frequent precursor to public company deal litigation is the books and records request under Section 220 of the Delaware General Corporation Law. Typically employed by plaintiffs as the first step of “information gathering” for derivative litigation, a company’s right to limit the potential geographic use of requested information has been validated by the Delaware courts.
The practice of “appraisal arbitrage” has hit the radar for all public company dealmakers. Typically employed, to date, by activist investors and hedge funds, this strategic tool has recently received a shot in the arm with recent Court of Chancery opinions.
Two decisions by the Delaware courts (In re Family Dollar Stores, Inc. and C&J Energy Services Inc. v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust have more precisely defined the contours—substantive and procedural—of exactly what is (and what is not) required by a board of directors in complying with “Revlon” duties related to the sale of a controlling stake in a Delaware corporation.
In Cigna Health & Life Insurance Company v. Audax Health Solutions, Inc. (Del. Ch. November 26, 2014), the Delaware Court of Chancery invalidated two buyer-imposed requirements that are frequently found in private company mergers, specifically the conditioning of payment of merger consideration on a release and certain aspects of post-closing […]
Aware that parties to an acquisition need to share legal advice in connection with pre-closing activities, a New York appellate court permits the common-interest privilege to protect pre-closing communication, even without pending or anticipated litigation.
The Delaware Supreme Court rules that an integration clause in an acquisition agreement does not transform non-binding earnout provisions in a letter of intent into binding obligations under the definitive agreement.
Court reviews detailed allegations and potential scope of recovery for fraud alleged against pre-closing officers, directors and, notably, innocent selling stockholders in a private company acquisition.
SEC Issues Guidance on Proxy Voting and Proxy Advisory Firms – Will this Change Proxy Voting Behavior or the Role of Proxy Advisers?
The Securities and Exchange Commission (SEC) recently issued regulatory guidance (see related Q&A) regarding proxy voting responsibilities, including the role of proxy advisory firms and use of advisory firm advice. Implicit in the staff’s guidance is the expectation that firms and advisers incorporate updates to their voting policies and processes […]
In a recent DC Circuit case, In re: Kellogg Brown & Root, Inc., No. 14-5055 (June 27, 2014), the DC Court of Appeals clarified the scope of the attorney-client privilege in the context of a business’s internal investigation and described four aspects of an internal investigation that may vary while […]
A recent amendment to Delaware law clarifies certain statute of limitations rules, providing parties with increased flexibility to control survival periods for acquisition agreement indemnity provisions and related breach-of-contract claims. The amendment to the Delaware General Corporation Law (the “DGCL”) is described below, along with drafting tips for successfully incorporating […]
The Delaware Chancery Court recently reviewed the application of the implied covenant of good faith and fair dealing in connection with “earnout” provisions in an acquisition agreement. In American Capital Acquisition Partners, LLC v. LPL Holdings, Inc., the court allowed a claim for a breach of the implied covenant to […]
In re Third Point LLC v. Ruprecht, et al. (Del. Ch. May 2, 2014). In the much anticipated review of Sotheby’s two-tiered stockholder rights plan adopted in response to Third Point’s activist campaign and proxy contest, the Delaware Court of Chancery held that the Sotheby’s board did not breach its […]
In a much anticipated judicial development, the Delaware Supreme Court affirmed the holding of In re MFW Shareholders Litigation (Del. Ch. 2013) that if certain procedural protections are in place from the outset of a transaction, a controlling stockholder buyout otherwise subject to the entire fairness standard could be subject […]
In Rural Metro, the Delaware Chancery Court held that RBC Capital Markets, LLC, as financial advisor to the Rural Metro (Target), had aided and abetted Target’s directors in breach of their fiduciary duties in connection with its sale to Warburg Pincus (Buyer). This is the latest in a string of […]
Delaware law limits parties’ ability to contractually agree to lengthen the time period for making claims beyond the statute of limitations that would otherwise apply to the underlying claims. A line of Delaware cases (the most well known of which is GRT, Inc. v. Marathon GTF Technology, Ltd.) have held […]
In Great Hill, the court held that the right to assert the privilege over attorney-client communications and ownership of such communications passes to the acquirer in acquisitions structured as mergers under Delaware law. This case clarifies the law in Delaware mergers by expressly refusing to follow prior New York case […]
Cooley partner Craig Menden coauthored the memo, Fraud and Non-Reliance and Exclusive Remedy Clauses in Acquisition Agreements, to the Subcommittee on M&A Jurisprudence.
In a case involving a common fact pattern, Trados “Part 2” provides a very helpful analysis of a board’s fiduciary obligations when common stockholders receive no consideration in an acquisition. Trados was acquired in 2005 for $60 million in cash and stock. The preferred stockholders received $52.2 million of the […]
The amendments to Delaware law streamlining the back-end merger process in transactions structured as two-step tender offers went into effect August 1. DGCL 251(h) and the related changes to the DGCL permit acquirers to complete the back-end merger after receiving 50% plus one share tendered without being required to obtain […]
Amendments to California Corporations Code (“CCC”) §603(b) were signed into law on August 16, 2013 and will become effective January 1, 2014. CCC §603(b) relates to written consents of shareholders in certain reorganization transactions. CCC §603(b) currently requires that a corporation approving a reorganization by shareholder written consent either (1) solicit […]