Ropes & Gray Discusses Limits of Delaware’s Corwin Decision

The Delaware Supreme Court’s decision in Corwin v. KKR Financial Holdings LLC set a high bar for plaintiff stockholders seeking to challenge public company mergers. Assuming a transaction that is not subject to entire fairness review was approved by a fully informed, uncoerced, disinterested vote of a majority of the stockholders of a target corporation, the business judgment rule applies to post-closing damage suits and, as further clarified by the Supreme Court decision in Singh v. Attenborough, a plaintiff could only challenge such a merger on the basis that it constituted waste. The decision in CoRead more

O’Melveny discusses Delaware Supreme Court Confirming Business Judgment Standard For Fully Informed, Uncoerced Stockholder Vote

On May 6, 2016, in Singh v. Attenborough, No. 645, the Delaware Supreme Court strengthened the defenses available to directors by clarifying a roadmap for effectively dismissing post-closing claims for breach of fiduciary duty.  A fully informed, uncoerced vote of the majority of disinterested stockholders, and a well-run sale process with any deficiencies either avoided or disclosed in advance of the stockholder approval are key to invoking director-favorable protections against post-closing liability for breach of fiduciary duty in merger transactions.

The Supreme Court issued the Order upon reviewing Chancery Court’s dismissal of stockholder-plaintiffs’ claims for breach of fiduciary duty … Read more

O’Melveny & Myers discusses Break-up Fees in Delaware: A Delicate Balance for All Parties Involved

The negotiation of the “deal protection” package in a public company M&A transaction almost always involves the inevitable discussion as to the amount and percentage of the break-up fee.  In general, the Delaware courts have upheld break-up fees within a range of 3% to 4% of equity value as reasonable and not preclusive.  Delaware courts also have accepted somewhat higher break-up fees in certain deals (e.g., 4.3% in In re Topps Company Shareholder Litigation, and 4.4% in In re Answers Corporation Shareholder Litigation), depending on the circumstances.

Despite the contentious negotiations surrounding break-up fees and other deal protection … Read more