Appraisal Arbitrage and the Future of Public Company M&A

The following post comes to us from Charles Korsmo, Assistant Professor at Case Western Reserve University School of Law, and Minor Myers, Assistant Professor at Brooklyn Law School.  It is based on their recent paper entitled “Appraisal Arbitrage and the Future of Public Company M&A” and is available here.  

Stockholder appraisal has been thrust into the spotlight by two high-profile and very large appraisal actions in Delaware involving the Dell and Dole going-private transactions. As we show in our forthcoming article, “Appraisal Arbitrage and the Future of Public Company M&A,” these two cases are part of a larger trend … Read more

Wachtell Lipton discusses A New Takeover Threat: Symbiotic Activism

The Pershing Square-Valeant hostile bid for Allergan has captured the imagination. Other companies are wondering whether they too will wake up one morning to find a raider-activist tag-team wielding a stealth block of their stock. Serial acquirers are asking whether they should be looking to take advantage of this new maneuver. Speculation and rumor abound of other raider-activist pairings and other targets.

Questions of legality are also being raised. Pershing Square and Valeant are loudly proclaiming that they have very cleverly (and profitably) navigated their way through a series of loopholes to create a new template for hostile acquisitions, one … Read more

BakerHostetler discusses Retaining the Attorney-Client Privilege in a Merger

In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, Chancellor Strine of the Delaware Chancery Court recently reaffirmed that the target company in a Delaware merger is the sole holder of the attorney-client privilege to communications with its counsel and the privilege cannot be claimed by the seller (the target’s shareholders). The Great Hill case involved a buyer who filed suit for fraudulent inducement by the seller following the consummation of the buyer’s merger with a company owned by the seller because the buyer found troubling communications between the seller and counsel for the … Read more

Sullivan & Cromwell discusses In re Orchard Enterprises, Inc. Stockholder Litigation

In October 2009, Dimensional Associates, LLC (“Dimensional”), the controlling stockholder of The Orchard Enterprises, Inc. (“Orchard”), which held 42% of Orchard’s outstanding common stock and 99% of its outstanding convertible preferred stock that collectively gave it approximately 53% of Orchard’s outstanding voting power, formally proposed a squeeze-out merger at a price of $1.68 per share, representing a 25% premium to the then-current stock price. Orchard’s board responded by forming a special committee with a mandate that included the right to negotiate or reject a transaction with Dimensional and to solicit interest from other third parties. While four of the five … Read more

The Marketplace of Ideas: Should the SEC change the rules on blockholder disclosure?

The CLS Blue Sky Blog presents Part II of the third installment of our series, “The Marketplace of Ideas.” Earlier installments on different topics are available here and hereThe intent is to present different perspectives on the same subject by two or more authors.

Today, the subject is how the SEC should respond to Dodd Frank’s invitation to rethink the disclosure of beneficial ownership under Section 13(d). We have asked a number of experts for their views.

In Part I of this installment, available here, we heard from Professors Ronald J. Gilson of Columbia Law School and … Read more

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Editor's Tweet: The Marketplace of Ideas: Rethinking the Disclosure of Beneficial Ownership under Section 13(d) Part II

The Truth About Shareholder Activism

The following comes to us from Paul C. Hilal, a Partner at Pershing Square Capital Management, a New York City-based hedge fund founded in 2004.

Is shareholder activism good for the world?

A simple question, and yet it’s the subject of intense debate.  Proponents say activists play a key role in the markets, shaking up entrenched interests and unlocking long-term value by acting as change agents.  Critics claim activism pumps up short term stock prices for the benefit of the activists at the expense of long term interests of companies and their shareholders.

Who’s right and what does that suggest … Read more

Our Debate on the Williams Act and Shareholder Activism: Takeaways for the SEC

Our Blog’s most recent Marketplace for Ideas series has considered whether the SEC should tighten its rules under the Williams Act, which now require that investors must disclose purchases of a 5% or greater stake in public companies within ten days of crossing the 5% level. This debate began in March 2011, when Wachtell, Lipton, Rosen and Katz first petitioned the SEC to reduce the disclosure window from ten days to one, and SEC Staff immediately signaled that they were indeed inclined to tighten the disclosure period. In response, Lucian Bebchuk and I filed a comment letter urging the SEC … Read more

Cadwalader discusses Delaware Supreme Court Decision Upholding Business Judgment Rule Review for Certain Controlling Stockholder Transactions with Dual Minority Protections

On March 14, 2014, the Delaware Supreme Court upheld the Court of Chancery’s 2013 decision in In re MFW Shareholders Litigation , holding that in going-private mergers where there is a controlling stockholder, the use of both a truly independent special committee and a majority of the minority stockholder vote, allows for judicial review under the deferential business judgment standard.


In mid-2011, Ronald Perelman’s wholly-owned holding company, MacAndrews & Forbes, a 43% stockholder of M&F Worldwide (MFW), made a proposal to take MFW private by acquiring the minority shares at $24 per share. In its initial proposal, MacAndrews & … Read more

Weil Gotshal discusses SEC Speaks 2014: Charting a New Course for Enforcement Efforts

This year’s “SEC Speaks” conference in Washington, D.C., was most notable for an obvious shift in the SEC’s enforcement priorities. Several significant issues and efforts that had been the subject of extensive discussion last year – including financial crisis and insider-trading cases and the task force devoted to new and structured products, among others – received little or no attention this year. On the other hand, several new initiatives received very substantial emphasis, including principally the Commission’s new efforts in the public company accounting and financial statements area, and in the microcap fraud area. SEC Chair Mary Jo White highlighted … Read more

Wachtell responds to Bebchuk and Jackson’s Toward a Constitutional Review of the Poison Pill

In a recent paper, Professors Lucian Bebchuk and Robert Jackson have extended Professor Bebchuk’s extreme and eccentric campaign against director-centric governance into a new realm—that of the Constitution of the United States. They claim that “serious questions” exist about the constitutionality of the poison pill—or, more precisely, “about the validity of the state-law rules that authorize the use of the poison pill.” It is likely, they argue, that these state-law rules violate the Supremacy Clause of the Constitution, and are thus preempted, because they frustrate the purposes of the Williams Act, the 1968 federal statute that governs tender-offer timing … Read more

Majority-of-the-Minority Voting and Fairness in Freezeout Mergers

In a landmark decision now on appeal, In re MFW Shareholders Litigation, the Delaware Chancery Court ruled that a freezeout merger negotiated by an independent special negotiating committee (SNC) and conditioned in advance on approval by a majority-of-the-minority (MOM) vote should be reviewed under the business judgment rule. Before MFW, the practice was to review all such mergers for entire fairness, albeit with the burden on the plaintiff if the merger is either negotiated by an independent SNC or ratified in a fully-informed MOM vote. In contrast, review under the business judgment rule requires plaintiffs to plead and prove their … Read more

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Wachtell Lipton on Acquisition Financing: the Year Behind and the Year Ahead

Following a robust 2012, the financing markets in 2013 continued their hot streak. Syndicated loan issuances topped $2.1 trillion, a new record in the United States. However, as in 2012, financing transactions in the early part of 2013 were devoted mostly to refinancings and debt maturity extensions rather than acquisitions.  In fact, new money debt issuances were at record lows during the first half of 2013.  The second half of 2013, though, saw an increase in M&A activity generally, and acquisition financing in the fourth quarter and early 2014 increased as a result.
Investment Grade Acquirors

Debt markets have been … Read more

Cleary Gottlieb discusses U.S. Supreme Court’s Sharp Limits on General Jurisdiction Over Corporate Defendants

On January 14, the U.S. Supreme Court issued Daimler AG v. Bauman, further clarifying—and significantly narrowing—the constitutional limitations on a court’s assertion of general jurisdiction over a corporate defendant. Bauman carries significant implications for how corporate defendants should evaluate their amenability to the general jurisdiction of U.S. courts.

Where a court possesses “general” or all-purpose jurisdiction over a defendant, it has personal jurisdiction in any lawsuit against that defendant, regardless of whether the suit arises out of the defendant’s contacts with the forum. If no general jurisdiction exists, a court still may exercise “specific” jurisdiction over a corporate defendant where

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Rise of IntercontinentalExchange and Implications of its Merger with NYSE Euronext

The following comes to us from Latoya C. Brown, a practicing attorney in Florida and a former intern at the US Securities & Exchange Commission. The views expressed herein are those of the author and not necessarily those of the Commission.

On November 8, 2013, NYSE Euronext (“NYSE”) announced the timeline for the completion of its acquisition by IntercontinentalExchange (“ICE”).  As discussed in my recent article, Rise of IntercontinentalExchange and Implications of its Merger with NYSE Euronext, the combination of these two companies exemplifies a trend toward the creation of mega-exchanges that permit electronic trading of broad groups of … Read more

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The Dwindling of Revlon

In this blog post, I trace why my co-author Rob Ricca and I have concluded that the landmark 1986 Revlon ruling is, today, an insipid and remedially insignificant doctrine.  Its overly exalted place in M&A law endures because it is wrongly regarded in narrow, silo-like doctrinal isolation, even though it can only be understood as one part of a legal landscape that has dramatically changed since the mid-1980s.

The iconic Revlon doctrine has been an assumed, accepted, and integral part of M&A law for almost three decades.  In Revlon, the Delaware Supreme Court ruled that, in a corporate break-up sale, … Read more

Delaware Court Confirms High Bar To Escape Deal

The following post is based on a memo originally published by Cadwalader, Wickersham & Taft LLP on November 14, 2013 which can be found here.

Two recent Delaware Chancery Court opinions, issued on October 25 and November 9, 2013, illustrate the high bar that buyers and sellers must clear to escape an unfavorable deal or obtain a  court order requiring a deal to close.


In June 2013, Apollo Tyres agreed to acquire Cooper Tire & Rubber Co. for $35 per share in a  $2.5 billion transaction. Within weeks, commentators have suggested, buyer’s remorse set in. In  July, Apollo’s … Read more

The Underappreciated Importance of Personal Jurisdiction in Delaware’s Success

In an article to be published this Spring in the DePaul Law Review, I argue that Delaware’s position as the center of corporate litigation has been rooted in two unique but unconstitutional approaches to personal jurisdiction over fiduciaries. Until Delaware addresses serious problems with its personal jurisdiction statute, its other attempts to retain caseflow will ultimately be ineffective.

It is no secret that the Court of Chancery judges are worried and angry. The lifeblood of that court, stockholder litigation, is migrating out of Delaware to other states. If Delaware continues to lose caseflow, it risks losing its dominance in corporate … Read more

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Independent Directors as a Handy Political Tool

Boards of public corporations have more independent directors than ever before. Sixty percent of boards of S&P 500 companies are not only majority independent, but have a single insider on the board: the CEO. While Jamie Dimon is still CEO as well as chair of J.P. Morgan’s board, despite attempts to unseat him, this is becoming increasingly rare. Over the last 15 years, the percentage of S&P 500 firms with separated positions has risen from 16% to 45%.

Director independence has been pushed by institutional investors, exchanges, and also government regulators. The push for independence has continued despite, at best, … Read more

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Wachtell discusses Delaware Chancery Court’s Holding that Control over All Privileged Communications Passes to the Surviving Corporation in a Merger

Last week, the Delaware Court of Chancery ruled that an acquiring merger party obtains legal control of all of a target’s attorney-client communications, absent an express provision in a merger agreement to the contrary.  Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, C.A. No. 7906-CS (Del. Ch. Nov. 15, 2013).  In so ordering, the Delaware court declined to follow a decision of the New York Court of Appeals, Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (1996), which held that a selling party retains control of those privileged pre-merger communications that … Read more

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Willful Blindness as Boardroom “Bad Faith”

The recent increase in the frequency and success with which “willful blindness” theories have been asserted in litigation may have long term implications for the corporate director’s liability profile.

Willful blindness is an aggressive liability theory that seeks to expand the definition of “knowledge” to include situations in which institutions or individuals “turn a blind eye” when there is a high probability that a particular, troubling, fact or circumstance exists.  Assessing   willful blindness involves a highly subjective analysis, and can be especially troublesome for defendants in cases where bad facts, and real harm, may be present.  As such, it is … Read more

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