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