In a recent essay forthcoming in the Delaware Journal of Corporate Law (available on SSRN), we argue that the current controversy over “Don’t Ask, Don’t Waive” standstills in M&A practice highlights the need to apply mechanism design to change-of-control transactions.[1]  Mechanism design is a Nobel Prize-winning theory based on incentive compatibility, whereby algorithmic procedures render it in the parties’ interests to be forthcoming, or truthful about their “bottom lines,” rather than relying exclusively on ex-post enforcement.

A.  The Tension Between Deal Certainty and Value Maximization in M&A Transactions

In M&A auctions, the board’s duty to maximize … Read more

Chancellor Strine’s December 17, 2012 bench ruling in In re Ancestry.com Inc. Shareholder Litigation attracted immediate attention from M&A practitioners and scholars regarding the Chancellor’s comments on so-called “Don’t Ask, Don’t Waive” standstill provisions.[1]  That attention, however, overshadowed the Chancellor’s equally important guidance regarding the materiality—and, therefore, need to disclose to shareholders—of qualitative facts surrounding fairness opinions prepared by a target’s financial advisor.  This post attempts to highlight that guidance, now that some of the proverbially dust kicked up by the Chancellor’s commentary on “Don’t Ask, Don’t Waive” standstills has begun to settle.

Background to the Ancestry.com Dispute

Beginning … Read more

The recent discovery that corporate law litigation very often takes place in courts outside of Delaware has rattled the academic consensus that Delaware won the corporate law “race” by providing a well-managed forum staffed with expert judges willing to decide complex deal cases quickly.  In an apparent affront to this settled understanding, recent research shows that more cases are filed against Delaware corporations in other states than in Delaware itself.[1]  As a forum for corporate litigation, in other words, Delaware no longer dominates.

Shaken from their settled understandings, commentators have sounded the alarm that fewer cases decided in Delaware … Read more

One of the fundamental tenets of corporate law is that boards of directors owe fiduciary duties to the corporation and its stockholders. In the context of a sale of the corporation, these duties may require a board of directors to pursue multiple transactions in an effort to ensure that the corporation’s stockholders receive the highest price reasonably available for their shares. However, once a merger agreement has been signed, the board of directors of the target corporation typically becomes subject to contractual commitments not to pursue alternative transactions and to recommend the transaction to its stockholders. The potential tension between … Read more