January 10, 2013
Autopsy of a Merger
From the "things I'm reading" file: Autopsy of a Merger by Willam Owen. Squeezed this in over the break after I finished grading. It's definitely worth reading if you find yourself standing in front of a classroom for a living.
Owen was an in-house counsel at Trans Union when the transaction with Pritzker went down. He provides a very detailed look at how the deal went down and the personalities involved. It goes without saying that his portrayal of Van Gorkom is much more sympathetic than the portrayal of Van Gorkom by the Delaware Supreme Court. It's also consistent with contemporaneous profiles of him. Two things of interest about Van Gorkom that come through clearly from the book. First, Van Gorkom was apparently an early advocate of shareholder value as a driving force for corporate decision-making. In fact, he scoffed at the idea that boards should make decisions that put other constituencies (managers, employers) over stockholders. Second, Van Gorkom took the question of conflicts of interest related to an MBO seriously and was of the mind that management should never engage in transactions that raised potential conflicts. That, perhaps, explains his resistance to the KKR/management offer that showed up after he inked the initial deal with Pritzker.
Of course, Smith v Van Gorkom is pre-Revlon, but if one were to apply modern Revlon jurisprudence to the rich set of facts one gets from Autopsy, the case would have/should have come out differently. Was the process perfect? Certainly not. But, Revlon transactions need not have a perfect process. Was a disinterested board motivated to get shareholders the best price reasonably available in the short-term? Yes.
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I agree. Have taught an m&a course to Northwestern upperclassmen for three, soon to be four, years and Van Gorkom is the first case they read. Also have read Owen's book. I've never understood why Justice Moore sided with the majority, and that the dissent was correct in saying the majority opinion reads like a plaintiff's brief. Van Gorkom and many of the outside directors were skilled in business, m&a, accounting and law; and the decision has led to the investment banker's relief act for lots of not very needy folks. It's almost as if someone got on their high horse because of anecdotal evidence that the signing at the opening of the Lyric Opera in Chicago was celebrated with champagne in cowboy boots! JHB
Posted by: john bitner | Jan 12, 2013 12:07:14 PM