Friday, January 24, 2014
Lyman Johnson and his co-authors have a paper, The Dwindling of Revlon, appear in the W&L Law Review. Here's the abstract:
This article traces the dramatic dwindling of the iconic Revlon doctrine. Over the past several years, we observe a paradox in M&A litigation. The number of challenges to “done deal” transactions has skyrocketed, but the number of successful Revlon claims - those procuring a remedy - has plummeted. Having set out to suggest, as a theory and policy matter, that Revlon might be extended into the attempted but failed “no deal” context, we conclude, ironically, that today there is little remedial clout to the Revlon doctrine in any setting.
The overly exalted place of Revlon in the law thought to govern M&A deals endures because it is regarded in narrow, silo-like doctrinal isolation even though it can only be understood as one part of a legal landscape that has dramatically changed since 1986. Revlon, for example, no longer sets the standard in damages cases. Thus, oft-cited statements from the QVC case regarding enhanced substantive scrutiny by courts, and the planning of an initial burden of proof on directors, are outmoded doctrinal vestiges in the personal liability context. As to injunctive relief, only one injunction - out of numerous claims - was granted on a Revlon theory in the six year period from 2008-2013.
By adopting a remedies perspective on Revlon, we thus see that the ongoing debate over what “triggers” Revlon in mixed consideration deals is a debate with small stakes: only pre-closing relief is up for grabs anyway, and that is rarely granted. We should stop regarding Revlon as a robust standalone doctrine. Delaware courts should go further, however. They should renounce Revlon’s faulty focus on short-term value maximization. Then, the corporate objective in the sale setting - of whatever kind - would be the same as it is (and should be) outside the sale setting: to pursue the best option for achieving long-term value.