Delaware Courts and Distress Deals: A Word to the Wise

Delaware courts are now adjudicating "busted deals,"  deals from the top of the bubble that were overpriced but not closed until the bubble burst.  Buyers looking to escape are, largely, being forced to pay damages (or even close) for attempting to walk.  The next spate of deals, that the Delaware courts will face two or even three years from now, will be distress deals.  Buyers, holding all the cards, will buy targets at distress prices ("It's either us or bankruptcy!") and target shareholders, when the terms of the deal set in, will complain.  Delaware courts will get the cases.  This means that buyers in these distress sales should be careful on how they press their advantage.  A high-handed buyer (no shareholder vote, maximum deal protections, maximum termination fees) may find that two or three years down the road that their demands look very, very bad in court.  A shareholder vote will not kill these deals but lack of a shareholder vote may give shareholder's a litigation hook down the road.  Onerous deal protection covenants are not needed if the buyer is the only player but may look very bad in court later when a judge wonders whether the target board was panicked and did not look around enough.  A word to the wise....