June 29, 2011
Glasscock confirmed to Chancery
According to the Delaware Law Weekly, Sam Glasscock was unanimously confirmed by the Delaware General Assembly today as Vice Chancellor to fill the vacancy created when Vice Chancellor Strine moved over to take up the position of Chancellor.
Banker conflicts and deal outcomes
The recent In re Del Monte brought to the fore the problem of investment bankers and the conflicts they often carry with them in arranging sales. In the words of Goldman Sachs banker, "Life is full of conflicts, some real, some imagined." Now, there is a paper from Agrawal, et al, The Impact of Common Advisors on M&A that exmaines the effect of having common advisers for the buyer and seller in sales. In short, deals where the investment bank is on both sides of the deal take longer to complete and tend to favor shifting transaction surplus to acquirers.
Abstract: We examine the conflict of interest that an investment bank faces when advising both the target and acquirer in a merger or acquisition (M&A) by investigating how common advisors affect deal outcomes. We compare M&As with common advisors to deals in which targets and acquirers use different advisors and account for the endogenous nature of this choice. We find that (1) deals with common advisors are less likely to be completed and take longer to resolve, and (2) sharing advisors does not affect the wealth gains of shareholders of targets, acquirers or the combined firm and the post-acquisition performance of acquirers. We find some evidence that valuation multiples paid for targets and deal premiums for public targets are significantly lower in transactions with common advisors, suggesting that common advisors tend to favor acquirers over targets, with an eye on future investment banking business from the larger, surviving firm. But most of our results suggest that common M&A advisors lead to neither better deal outcomes by facilitating information flow between targets and acquirers, nor worse deal outcomes by influencing both sides to hasten deal completion.
June 28, 2011
Teaching Materials Network
From Susan Rozelle at Stetson:
Tell your colleagues (directly and by forwarding this to other listservs, blogs, etc., if you can) about the Teaching Materials Network, that database of kind souls offering to share syllabi, teaching notes, Power Points, handouts, and other precious gems with fellow law professors who are putting together a new prep.
You can find us at www.law.stetson.edu/teachingmaterialsnetwork
Create an account, and then search the database by course, casebook, and credit hours to find the contact information of a fellow lawprof who has offered to help.
When you have materials of your own to share, log back in and click on the “Add or Update a Course Listing” link to add yourself to the list of folks who want to pay it forward. Please help us make this resource as user-friendly as possible by listing courses and books in their most recognizable form (e.g., "Forensic Evidence" rather than "CSI Law," and "Author's Last Name" rather than "Cases and Materials on X").
And when someone contacts you to ask for your teaching notes, please confirm that person is, in fact, a fellow law professor, and not one of your more enterprising students.
Comments or questions? Contact Susan Rozelle at firstname.lastname@example.org.
June 27, 2011
Kelley & Ervine on anti-Sandbagging
When negotiating an acquisition agreement, it often appears that the other side is negotiationg language without any real knowledge of what the law actually is. One area where this is often the case is anti-sandbagging provisions. This article frames the sandbagging/anti-sanbagging issue and provides a useful summary of the law in several of the most relevant jurisdictions:
In Delaware, the buyer is not precluded from recovery based on pre-closing knowledge of the breach because reliance is not an element of a breach of contract claim. The same is true for Massachusetts and, effectively, Illinois (where knowledge is relevant only when the existence of the warranty is in dispute). But in California, the buyer is precluded from recovery because reliance is an element of a breach of warranty claim, and in turn, the buyer must have believed the warranty to be true. New York is less straightforward: reliance is an element of a breach of contract claim, but the buyer does not need to show that it believed the truth of the representation if the court believes the express warranties at issue were bargained-for contractual terms.
In New York, it depends on how and when the buyer came to have knowledge of the breach. If the buyer learned of facts constituting a breach from the seller, the claim is precluded, but the buyer will not be precluded from recovery where the facts were learned by the buyer from a third party (other than an agent of the seller) or the facts were common knowledge.
Given the mixed bag of legal precedent and little published law on the subject, if parties want to ensure a particular outcome, they should be explicit. When the contract is explicit, courts in California, Delaware, Massachusetts and New York have either enforced such provisions or suggested that they would. Presumably Illinois courts would enforce them as well, but there is very little or no case law to rely upon.
June 27, 2011 in Asset Transactions, Contracts, Deals, Delaware, Leveraged Buy-Outs, Management Buy-Outs, Merger Agreements, Private Equity, Private Transactions, Transactions | Permalink | Comments (0) | TrackBack
Skype option mess
Skype - and its investors - are continuing to get bad press for their repurchase of stock options from employees let go immediately prior to the close of their sale to Microsoft. Here's Techcrunch's take on it. Felix Salmon also weighs in. Turns out that options issued by Skype - and the shares purchased pursuant to those shares - were subject to repurchase rights by the company. That makes them worth ... well ... not very much. I tend to agree with Arrington. Once it becomes common knowledge that private equity invested firms treat options this way, it will make it more expensive for private equity portfolio firms to hire employees. End of story.