M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, September 20, 2018

Two new Vice Chancellors for Chancery

Today, Gov Carney nominated Morgan Zurn and Katherine McCormick to fill the newly created vacancies in the Delaware Chancery Court. This will expand the number of chancellors from five to seven. A few years ago, the Chancery Court was often criticized for being an all-male bastion. With these two new additions, the number of women chancellors will rise to three. 

-bjmq

September 20, 2018 in Delaware | Permalink | Comments (0)

Wednesday, September 19, 2018

MAE Claim in Chancery

Earlier this week, Channel Medsystems sued Boston Scientific (complaint: Medsystems) over Boston Scientific's termination of their merger agreement. Boston Scientific claimed a MAE as the reason to scuttle the deal - in this case it was the apparent embezzlement of $3 million by a Channel Medsystems' employee.  Embezzlement as an MAE? They should probably read IBP  again. Under current law, while it's certainly not good, it's probably not going to be enough to be an MAE. Is a $3 million theft from a company worth $275 million material? Sure! Is it an MAE as described under IBP? Um. Probably not. While few (none) of these cases result in actual MAE's, they do offer parties opportunities to renegotiate the price. For example, in this transaction, a $3 million theft likely  hasn't changed the prospects of the target in any durationally significant manner. So, an MAE isn't going to fly, but it has likely reduced the price level for the target. 

-bjmq

September 19, 2018 in Material Adverse Change Clauses | Permalink | Comments (0)

Friday, September 14, 2018

Brexit wrinkle

Here's a wrinkle to keep in mind. If there is a "no deal" Brexit and the UK crashes out of the EU without any sort of backstop in place, deals that previously would have required EU antitrust review and approval will likely have to submit in both the EU as well as in the UK.  Brexit might be a mess, but it's more work for lawyers - even deal lawyers!

-bjmq

September 14, 2018 in Europe | Permalink | Comments (0)

Thursday, September 13, 2018

The nonsensical market out in appraisal

Just got to thinking about appraisal's market out exception and it strikes me that it doesn't make much sense. Sure, sure, students have a tough time reading and then understanding the statutory provision (thanks drafters). But I mean something different. If you receive stock in a publicly traded corporation or in stock of the acquirer, then no appraisal rights for you. If you receive cash for your stock, you get appraisal rights. Ok. But, the appraisal remedy was originally adopted at a time when consideration in mergers was mostly stock. Dissenting stockholders who didn't want the stock of the acquirer at the exchange ratio agreed to in the merger were given the right to be cashed out - to receive the value of their stock in cash money. So, modern appraisal statutes seem to get this exactly backwards. If you receive stock, no appraisal. If you receive cash (something other than stock of the surviving corporation or publicly traded stock), you have rights. 

Now that we live in the merger price as fair value era, it strikes me that we've moved very far away from appraisal's original intent into a weird place. I wonder whether it's even worth it.

See, now that I'm no longer an Associate Dean you get these random corporate law thoughts.

-bjmq

September 13, 2018 | Permalink | Comments (0)

Wednesday, September 12, 2018

MFW's ab initio requirement

 

This morning the Delaware Supreme Court heard arguments in Flood v. Synutra International. The main issue in the case was the status of MFW's ab initio requirement - whether in a controlling shareholder take-private transaction - the ab initio requirement announced in M& F Worldwide is a brightline requirement or if it's something less than that. The two justices who were most active were Justice Valihura and Chief Justice Strine. Justice Valihura seems to like brightline rules. On the other hand, Chief Justice Strine does not appear to be a big fan of the ab initio requirement. Strine's reluctance to see a "foot fault" on the ab initio requirement as a major problem shouldn't come a big surprise. His Chancery Court opinion that formed the basis for the later Delaware Supreme Court case in M & F Worldwide included no such requirement.

For your viewing pleasure:

 

-bjmq

September 12, 2018 | Permalink | Comments (0)

Monday, April 23, 2018

Call for Papers: Contractual Governance

From our friends at the AALS Section on Business Associations: 

Call for Papers for Section on Business Association Program on
Contractual Governance: the Role of Private Ordering
at the 2019 AALS Annual Meeting

The AALS Section on Business Associations is pleased to announce a Call for Papers from which up to two additional presenters will be selected for the section’s program to be held during the AALS 2019 Annual Meeting in New Orleans on Contractual Governance: the Role of Private Ordering.  The program will explore the use of contracts to define and modify the governance structure of business entities, whether through corporate charters and bylaws, LLC operating agreements, or other private equity agreements.  From venture capital preferred stock provisions, to shareholder involvement in approval procedures, to forum selection and arbitration, is the contract king in establishing the corporate governance contours of firms?  In addition to paper presenters, the program will feature prominent panelists, including SEC Commissioner Hester Peirce and Professor Jill E. Fisch of the University of Pennsylvania Law School.

Our Section is proud to partner with the following co-sponsoring sections: Agency, Partnership, LLC's and Unincorporated Associations, Contracts, Securities Regulation, and Transactional Law & Skills

Submission Information:

Please submit an abstract or draft of an unpublished paper to Anne Tucker, amtucker@gsu.edu on or before August 1, 2018.  Please remove the author’s name and identifying information from the submission.  Please include the author’s name and contact information in the submission email.

Papers will be selected after review by members of the Executive Committee of the Section. Authors of selected papers will be notified by August 25, 2018. The Call for Paper presenters will be responsible for paying their registration fee, hotel, and travel expenses.

Any inquiries about the Call for Papers should be submitted to: Anne Tucker, Georgia State University College of Law, amtucker@gsu.edu or (404) 413.9179.

April 23, 2018 | Permalink | Comments (0)

Monday, April 2, 2018

Corporate & Securities Litigation Workshop - Call for Papers

From our friends at the Workshop for Corporate & Securities Litigation:

The University of Richmond School of Law, in conjunction with Boston University School of Law, University of Illinois College of Law, and UCLA School of Law, invites submissions for the Sixth Annual Workshop for Corporate & Securities Litigation. This workshop will be held on October 19-20, 2018 at the University of Richmond School of Law in Richmond, Virginia. 

Overview
This annual workshop brings together scholars focused on corporate and securities litigation to present their scholarly works. Papers addressing any aspect of corporate and securities litigation or enforcement are eligible, including securities class actions, fiduciary duty litigation, and comparative approaches. We welcome scholars working in a variety of methodologies, as well as both completed papers and works-in-progress.
Authors whose papers are selected will be invited to present their work at a workshop hosted by the University of Richmond. Hotel costs will be covered. Participants will pay for their own travel and other expenses.

Submissions
If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to corpandseclitigation@gmail.com by Friday, May 25, 2018. Please include your name, current position, and contact information in the e-mail accompanying the submission.  Authors of accepted papers will be notified by late June. 

Questions
Any questions concerning the workshop should be directed to the organizers: Jessica Erickson (jerickso@richmond.edu), David Webber (dhwebber@bu.edu), Verity Winship (vwinship@illinois.edu), and Jim Park (James.park@law.ucla.edu).

April 2, 2018 | Permalink | Comments (0)

Friday, August 18, 2017

Faculty Position - Richmond

Richmond is seeking to fill slots in the corporate area. See notice below:

The University of Richmond School of Law seeks to fill three tenure-track positions for the 2018-2019 academic year, including one in corporate/securities law.  Candidates should have outstanding academic credentials and show superb promise for top-notch scholarship and teaching.  The University of Richmond, an equal opportunity employer, is committed to developing a diverse workforce and student body and to supporting an inclusive campus community.  Applications from candidates who will contribute to these goals are strongly encouraged. 

Inquiries and requests for additional information may be directed to Professor Jessica Erickson, Chair of Faculty Appointments, at lawfacultyapp@richmond.edu

-bjmq

August 18, 2017 in Academic Jobs | Permalink | Comments (0)

Friday, April 21, 2017

Call for Papers: Access to the Courts in the Transactional Setting

CALL FOR PAPERS

AALS Section on Transactional Law and Skills

Access to the Courts in the Transactional Setting

2018 AALS Annual Meeting

San Diego, CA

 

 

This call for papers solicits unpublished papers that analyze the question of access to the courts in a variety of transactional law settings.

From small business disputes, to mandatory consumer arbitration, to restrictions on shareholder lawsuits, it is no longer obvious that parties will have access to courts in the event of a dispute. In many cases small businesses may negotiate for alternative dispute resolution in commercial contracts as more efficient than going to courts. In others, like in the context of consumer contracting, restricting access to the courts is not typically subject of negotiation, and many consumer transactions now come with mandatory arbitration clauses. In recent years, in response to an explosion in shareholder and class action litigation, corporations also began to look to a variety of self-help remedies (often aided by state legislatures), including exclusive forum provisions and fee-shifting provisions among others, to restrict access to the courts by shareholders.

Taken together one could reasonably question whether the current trajectory in common business and consumer settings to limit parties and third parties access to the courts through a variety of transactional mechanisms is good policy or it goes too far.

The Section on Transactional Law and Skills invites submissions from any full-time faculty member of an AALS member school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper on this topic to submit a 1 or 2-page proposal to the Chair of the Section by August 31, 2017. Papers accepted for publication as of August 31, 2017 that will not yet be published as of the 2018 meeting are also encouraged. The Executive Committee will review all submissions and select proposals for presentation as part of our AALS 2018 Section Meeting.

Please direct all submissions and questions to the Chair of the Section, Brian JM Quinn, section chair, at the address below:

Brian JM Quinn
Boston College Law School
885 Centre St., Newton MA 02459
Email: brian.quinn@bc.edu

April 21, 2017 in Conference Announcements | Permalink | Comments (0)

Tuesday, April 4, 2017

Call for Papers: Workshop for Corporate & Securities Litigation

Fifth Annual Workshop for Corporate & Securities Litigation: Call for Papers

UCLA School of Law, in conjunction with the University of Richmond School of Law, Boston University School of Law, and University of Illinois College of Law, invites submissions for the Fifth Annual Workshop for Corporate & Securities Litigation. This workshop will be held on October 20-21, 2017 at UCLA School of Law in Los Angeles, California.

Overview

This annual workshop brings together scholars focused on corporate and securities litigation to present their scholarly works. Papers addressing any aspect of corporate and securities litigation or enforcement are eligible. Appropriate topics include, but are not limited to, securities class actions, fiduciary duty litigation, or comparative approaches to business litigation. We welcome scholars working in a variety of methodologies, as well as both completed papers and works-in-progress at any stage.

Authors whose papers are selected will be invited to present their work at a workshop hosted by UCLA School of Law on October 20-21, 2017.  Hotel costs will be covered. Participants will pay for their own travel and other expenses.

Submissions

If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to corpandseclitigation@gmail.com by Friday, May 26, 2017. Please include your name, current position, and contact information in the e-mail accompanying the submission. Authors of accepted papers will be notified by late June. 

Questions

Any questions concerning the workshop should be directed to the organizers: Jim Park (James.park@law.ucla.edu), Jessica Erickson (jerickso@richmond.edu), David Webber (dhwebber@bu.edu) and Verity Winship (vwinship@illinois.edu).

April 4, 2017 | Permalink | Comments (0)

Tuesday, February 7, 2017

Appraisal and Merger Price

Over the past couple of years something has been happening in appraisal litigation. For a long time, appraisal litigation was something of a backwater: experts battling over which variables a judge must insert into a discounted cash flow model and the proper level for beta. Shoot me. 

Anyway, as I said, something is happening. Appraisal litigation is getting more interesting. In part this is a response to the growing interest in appraisal proceedings by investment funds. Myers and Korsmo wrote about this trend in their 2015 paper Appraisal Arbitrage and the Future of Public Company M&A. As they laid out in their paper, there has been an explosion in investor interest in appraisal proceedings. Appraisal arbitrage, it turns out, is good business. 

As the number of appraisal actions has increased (partly also in response to the Corwin ruling having some bite), so too has attention to how fair value is determined by the courts. In the last couple of years, at the Chancery Court, chancellors have started moving away from the view that the court will determine fair value without regard to the merger price. Now, in certain circumstances (where the deal price is a product of a competitive or robust sales price) chancellors may consider merger price as one of the relevant factors for purposes of determining fair value.

Now this question has found its way to the Delaware Supreme Court and the parties are lining up on both sides. There are even amici! Two sets of amici have rolled up: on the one side there are law professors arguing that the court should be able to presumptively rely on merger price to determine fair value in an appraisal proceeding unless that price does not result from arm's length bargaining (DFC Holdings - Bainbridge, et al). On the other are law professors arguing requiring a court to rely on merger price to determine fair value would run counter to the language of the statutory appraisal remedy and also not always reflect fair value (DFC Holdings - Talley, et al).  Read both briefs. They are a great review of the issues relating to this issue.

-bjmq

 

February 7, 2017 in Delaware, Litigation | Permalink | Comments (0)

Tuesday, January 17, 2017

Antitrust review revolution?

Ok, so revolution is perhaps a bit overblown. But, we are about to undergo a significant change in antitrust enforcement in the context of merger and acquisitions - probably more significant than the change we saw after the transition from Bush to Obama. Under Bush, the DOJ/FTC took a - relatively speaking - hands off/free market approach to enforcement. That approach was generally consistently with the free market principles espoused by traditional Republican administrations. With Obama, the DOJ/FTC became much more active in - again not inconsistent with general Democratic positions.

Well, now, it seems we are in for something completely different. 

While generally in line with Republican orthodoxy (see appointment of former FTC commissioner Joshua Wright to head up transition efforts), I doubt that we will be returning to a principled, hands-off approach to merger review. 

Take two examples. First, there's AT&T/Time Warner.  On the campaign trail, President-elect Drumpf made it clear that he believed such a merger would result in "too much concentration of power" and that his administration would not likely approve the deal.  Clearly, CNN (Time Warner asset) attracted attention (negative) of the President-elect. Last week, one day after the press conference in which President-elect Drumpf ripped into CNN ("fake news!"), AT&T's CEO paid a visit to the President-elect at Drumpf Tower.  Although he denies it, it's hard to imagine that the pending transaction did not come in conversation or that it wasn't at least obliquely part of the discussion. Clearly, AT&T understands that it has to be on the President-elect's good side if it wants the deal to be approved.

Second, there is the pending Bayer-Monsanto transaction. The $66 bn mega merger which is to create one of the world's largest agriculture conglomerates was announced last September. Since then, it has been subject to regulatory review.  Last week, the CEOs of both Bayer and Monsanto made a pilgrimage to Drumpf Tower to discuss the deal with the President-elect. Today comes news that the Bayer and Monsanto are going to promise to create jobs in the US in exchange for regulatory approval

So we have moved into wholly new territory: regulation by deal. If you want your high profile deal approved, forget what FTC/DOJ have to say, get an audience with President Drumpf and he will bless the transaction in exchange for some jobs or whatever else. It's the kind of move that is more common in the developing world than here or in Europe, but that's the new reality. 

Hang on.

-bjmq

 

January 17, 2017 in Antitrust | Permalink | Comments (0)

Thursday, January 5, 2017

Ross Johnson, RJR Nabisco, and Barbarians

I'd be remiss if I didn't note that F. Ross Johnson recently passed away. Johnson was the real life protagonist of Bryan Burrough and John Helyar's Barbarians at the Gate - the story of the auction of RJR Nabisco and Johnson audacious attempt to lead a management buyout.  You can find the official obit here at the NY Times.  But, for most of us, we'll always have the HBO treatment of Barbarians at the Gate to remember those times.

-bjmq

 

January 5, 2017 in Books, Leveraged Buy-Outs, Management Buy-Outs | Permalink | Comments (0)

Friday, July 29, 2016

Richmond is Hiring

From the law school at the University of Richmond:

The University of Richmond School of Law seeks to fill two entry-level tenure-track positions for the 2017-2018 academic year, including one in corporate/transactional law.  Candidates should have outstanding academic credentials and show superb promise for top-notch scholarship and teaching.  The University of Richmond, an equal opportunity employer, is committed to developing a diverse workforce and student body and to supporting an inclusive campus community.  Applications from candidates who will contribute to these goals are strongly encouraged. 

Inquiries and requests for additional information may be directed to Professor Jessica Erickson, Chair of Faculty Appointments, at lawfacultyapp@richmond.edu

- AA

July 29, 2016 in Academic Jobs | Permalink | Comments (0)

Thursday, June 23, 2016

No-brainers and conflicts

So, Elon Musk of both SolarCity and Tesla fame has announced a "no-brainer": the merger of SolarCity and Tesla. you can find a copy of SolarCity's offer to acquire Tesla here.  Obviously, with Musk on both sides of this deal, he is conflicted, as is his fellow director Antonio Gracias. But, as we know, being on both sides of a deal isn't necessarily damning. SolarCity's offer lays out a basic strategy for trying to ensure a deal, should it proceed, gets the business judgment presumption (from the offer):

To help ensure that, Tesla is prepared to make the consummation of a combination of our companies subject to the approval of a majority of disinterested stockholders of both SolarCity and Tesla voting on the transaction. In addition, as a result of their overlapping directorships, Elon Musk and Antonio Gracias have recused themselves from voting on this proposal at the Tesla board meeting at which it was approved, and will recuse themselves from voting on this proposal at the SolarCity board as well. We believe that any transaction should be the result of full and fair deliberation and negotiation by both of our boards and the fully-informed consideration of our respective stockholders.

So, the basic structure will include a requirement that the deal be approved by a majority of disinterested stockholders and also recusals from interested directors - as both directors and stockholders.  That's usually enough to ensure business judgment, especially since Musk's position is short of that of a controller (approximately 20% or so of SolarCity and 25% of Tesla). Given that Musk's position will be sterilized through recusal a decision whether this deal turns out to be a no brainer or not will fall on the shoulders of disinterested stockholders. Delaware courts have leaned heavily on this kind of process to remedy defects of transactions involving interested directors/stockholders.  Dell followed a similar path in its going private transaction. The process it adopted sought to ensure that Michael Dell would not have a direct effect on vote of stockholders by sterilizing his shares and recusing himself from board deliberations. The deal got done. But, two years plus later, in an appraisal action the court determined the price stockholders received in that deal fell short of a "fair value". That leaves one to wonder whether these procedural safeguards are as effective as the court hopes.

-bjmq

 

June 23, 2016 | Permalink | Comments (0)

Wednesday, June 15, 2016

Evolution of Merger Agreements

Anderson and Manns have posted a draft of a paper they presented at this year's AALS Transactional Law panel in NYC, The Inefficient Evolution of Merger Agreements. This paper is one of a couple of recent papers conducting empirical analyses of merger agreements. It's well worth a read!

Abstract: Transactional law is one of the most economically significant areas of legal practice and accounts for a large percentage of the profits and staffing at most elite law firms. But in spite of its economic importance, there has been almost no empirical work on the legal drafting process and the evolution of transactional documents over time. We have sought to fill this gap by analyzing the evolution of public company merger agreements in a dataset that encompasses 12,000 merger agreements over a 20-year period. Using computer textual analysis, we are able to identify the precedent, an earlier merger agreement, which serves as the template for the drafting of each deal. This approach allows us to construct comprehensive “family trees” of merger agreements, which we use to show how agreements are created and how they change over time.

We use this innovative approach to explore whether transactional drafting is driven by a rational process that minimizes the cost of deal documentation and risk to clients or by an ad hoc process that increases billable hours and risk. We show that a high level of “editorial churning,” ad hoc edits that appear to be cosmetic rather than substantive, takes place in legal drafting. Over half of the text of merger agreements is routinely rewritten during the drafting process even though the substantive provisions of merger agreements have similar features. Significant variation exists among merger agreements even involving the same firm as there is no evidence of firm-specific templates or industry-specific templates in most cases. Lawyers appear to choose earlier merger agreements as deal templates based on familiarity with past deals rather than based on the economic needs of clients or cost mitigation. Our empirical findings provide strong evidence of significant (structural) inefficiency in the drafting process which raises costs and risk to clients.

We argue that this inefficiency calls for an industry-wide solution of creating standardized templates for merger agreements that could be used across firms. The use of standardized documentation would help to minimize the time consuming (and expensive) drafting process of lawyer- and firm-specific edits that do little, if anything, to protect clients or affect the substance of the transaction. Furthermore, deal term standardization would have positive externalities as judicial opinions crystalize the meaning of standardized text. In addition, our analysis suggests that, somewhat counterintuitively, the failure to standardize text actually may stifle true innovation in the transactional context. We argue that by establishing an industry-wide set of “base documents,” lawyers could create the technological platform on which to create truly innovative solutions for clients at lower cost. While lawyers may not have the self-interest to embrace a standardized set of documents on their own, we argue that repeat-player private equity firms or trade associations for the private equity industry may have the economic interest and leverage to push for greater standardization.

-bjmq

June 15, 2016 in Merger Agreements | Permalink | Comments (2)

Tuesday, June 14, 2016

Will they ever learn?

That was the question a friend asked. Apparently, someone decided Microsoft's proposed acquisition of LinkedIn was just too good to miss and purchased a boatload of call options just before the deal was announced. How much is a "boatload"? This much:

LinkedInOptions

Hmm. Let's see. The average volume of LinkedIn call options back until February looks to be about 6 contracts per day according to this chart. Do you think the SEC would notice if I bought more than 600 contracts the day or two before the transaction is announced?! If I could put 600 in all caps I would have. It's just that ridiculous. Who ever this guy is, he is going to get caught. And you know what? He deserves to get caught. Just another example of someone's greed outpacing their common sense.

-bjmq

 

June 14, 2016 in Insider Trading | Permalink | Comments (1)

Monday, June 13, 2016

Get it while you can

Drafting guru Ken Adams now has a print edition available of his ebook, "The Structure of M&A Contracts".  I recommend this book to anyone dipping their toe into an M&A practice.  Seriously. For many law students now becoming law firm associates, the M&A contract is a lengthy almost incomprehensible document. The usual path is simply to ignore it and slowly absorb the structure of the contract by osmosis over time. That's one approach, or you can take a more active approach to understanding the document and how it gets drafted. 

-bjmq

June 13, 2016 in Books | Permalink | Comments (0)

Wednesday, June 1, 2016

Barclays Banker Pays for Renovations with Tips

The DOJ is pursuing criminal and civil charges against a former Barclays banker for allegedly paying for renovation of his bathroom with insider tips: 

According to the complaint, McClatchey began tipping the Long Island-based plumber, a friend, in 2013, enabling him to execute trades ahead of merger announcements involving 11 companies, including Forrest Oil Corp and PetSmart Inc.

In exchange, the plumber made thousands of cash payments to McClatchey, in some instances placing cash in a gym bag that the banker brought with him to a marina in Long Island, and also provided home renovation services.

 I think even under Newman free plumbing services is going to count as a personal benefit. Here's the civil complaint.  The SEC is alleging that McClatchey received cash as well as bathroom renovation services in exchange for insider tips on upcoming mergers.

-bjmq

June 1, 2016 | Permalink | Comments (0)

Tuesday, May 31, 2016

Dell Appraisal Results

Well, Carl Icahn said $13.75 for Dell's 2013 going private deal was too low and he encouraged stockholders to seek an appraisal for their shares.  While Mr. Icahn wasn't patient enough to hang in there, for those who were, they got a 22% bump in the consideration due to them according to Reuters. Vice Chancellor Laster just handed down an opinion in the Dell appraisal case that set the "fair value" of Dell shares at the time of the going private deal at $17.62. Here's the Dell appraisal opinion.   So, according to the court, the special committee negotiated a price that was 22% below what the court believed was a fair value. Remember, the board was subject to Revlon during the going private process - so it was tasked not just with seeking a fair price, but with seeking the highest price reasonably available. One wonders whether how a board can fail to negotiate a fair price while still comporting with its fiduciary duties to seek the highest price available for its stockholders.

-bjmq 

May 31, 2016 | Permalink | Comments (0)