Appraisal Arbitrage and Shareholder Value

Post-merger appraisal rights[1] have attracted more than their fair share of controversy in recent years.  When activated, appraisal rights give the shareholders of a Delaware target corporation[2] the option to eschew the consideration of the proposed deal, pursuing instead a judicial determination of the “fair value” of their shares. By statutory requirement, this judicially-crafted valuation imposes no explicit burden of proof on the parties, and it must be based on all relevant factors (excluding buyer side synergies).

Although historically a sleepy corner of mergers and acquisitions litigation, appraisal proceedings have awoken dramatically in the last decade.  An important … Read more

Hedge Fund Activism: Impacts and Options

Hedge fund activism has increased almost hyperbolically.  Some view this optimistically as a means for bridging the separation of ownership and control; others are more pessimistic, seeing mainly wealth transfers from bondholders or speculative expectations of a takeover as fueling the spike.  Equivalent division exists over the impact of this increased activism, with optimists seeing real gains that do not erode over time and improvements in operating performance, and pessimists predicting shortened investment horizons, increased leverage, and reduced investment in research and development.

In a paper recently posted on SSRN,[1] we take an analytic perspective.  We begin by surveying the … Read more