Monday, November 26, 2018
I've seen some hand-wringing among my fellow corporate law scholars that Corwin represents some sort of free pass for bad directors in the context of a sale - a 'get out of jail free' card as it were. Last week before the Thanksgiving holiday, VC Slights gave us a reminder that Corwin may be many things, but it is not that. No 'get out of jail free' cards.
Remember, under Corwin, the Delaware Supreme Court held that "[t]he business judgment rule is invoked as the appropriate standard of review for a post-closing damages action when a merger that is not subject to the entire fairness standard of review has been approved by a fully informed, uncoerced majority of the disinterested stockholders.”
So, where the litigation involves a challenge to an arm's length sale of the corporation, Corwin is in play, but it requires a fully-informed stockholder vote. In many other situations, including the preliminary injunction phase, courts have shown great deference to the power of an uncoerced, fully-informed stockholder vote to forgive director sins. No difference in the Corwin context. If shareholders know all the facts and accept them by way of an uncoerced 'yes' vote to a deal, courts are loathe to step in and tell shareholders they are wrong.
That said, there are limits. In Tangoe, the court refused to apply Corwin where the stockholders vote was not fully-informed due to inadequate board disclosures prior to the vote. In Tangoe, the board sought to sell the company following a financial restatement and subsequent delisting by NASDAQ. Shareholders challenged and sought post-closing damages. In refusing the board's motion to dismiss, VC Slights made it clear that getting Corwin protection isn't going to be as easy as all that:
"But, to earn pleading-stage business judgment deference by invoking stockholder approval of a challenged transaction, the directors must demonstrate that they carefully and thoroughly explained all material aspects of the storm to stockholders—how the company sailed into the storm, how the company has been affected by the storm, what alternative courses the company can take to sail out of the storm and the bases for the board’s recommendation that a sale of the company is the best course."
Absent a fully-informed stockholder vote, there is no Corwin protection. And, the burden is going to be on the board to demonstrate that shareholder vote was fully-informed and thus effective. So, fear not. At least for now.
Monday, November 19, 2018
Ever since Delaware adopted §251(h) to deal with the percolating top-up option issue ('you're going to issue how many shares?!'), there has been a small, but nagging issue. What do we call this new kind of merger. Well, lawyers aren't all that creative. The §251 statutory merger is known as a "long-form merger." The §253 statutory merger is known as a "short-form merger." Now, after a few years of market percolation, it seems we have settled on a name for these back-end mergers that clean up the cats-and-dogs following a successful tender offer.
Ladies and gentleman, I introduce you to the §251(h) "medium-form merger."
Friday, November 16, 2018
Apparently the whole issue of mandatory arbitration of shareholder disputes has begun to percolate again. The issue is whether the SEC should permit registration statements to go effective with mandatory shareholder arbitration provisions in their corporate charters. This had been percolating for some time as a high priority item for some interest groups, waiting for a Republican administration to push it through. So, here we are, a two years into the Trump Administration and the scuttlebutt is that there is talk of moving forward with this.
Commissioner Pierce seems fine with the idea. Commissioner Piwowar is already on the record as good to go with this. Commissioner Clayton (here) and then Commissioner Jackson, on the other hand seem reticent to move away from the status quo (so, no). We'll see where it goes from here, but clearly if this is going to move, now is the time.
Before things move too quickly, though, just a gentle reminder that under §115 of the Delaware Corporation Law, mandatory arbitration provisions that prevent shareholders from bringing their cases in the Delaware Chancery Court are not permitted to be included in the corporate charter. Section 115 reads as follows:
The certificate of incorporation or the bylaws may require, consistent with applicable jurisdictional requirements, that any or all internal corporate claims shall be brought solely and exclusively in any or all of the courts in this State, and no provision of the certificate of incorporation or the bylaws may prohibit bringing such claims in the courts of this State. “Internal corporate claims” means claims, including claims in the right of the corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity, or (ii) as to which this title confers jurisdiction upon the Court of Chancery. (Emphasis added)
Even if the SEC permits a corporation to go public with such a provision, such a provision would violate state corporate law.
Given that more than 60% of publicly traded companies are incorporated in Delaware, if the SEC were to move forward with permitting mandatory shareholder arbitration, most listed corporations would not be in a position to include such provisions. So, why bother? Indeed, there are lots of good reasons why the SEC shouldn't take a permissive approach towards shareholder arbitration.
First, I'm no fan of the litigation flotsam that jammed up the courts these past few years. Frankly, the disclosure settlement litigation was mostly just rent seeking in the economic sense. We're all better off without it. However, the creation of law by courts operating in the open is a public good. If shareholder claims were to be moved into arbitration we would lose the value of incremental developments of the law and the value associated with investors as well as managers actually knowing what the law is. All of that becomes a closely held mystery once we move a substantial block of shareholder claim resolution into private arbitration.
Second, in confidential arbitration bad actors and bad actions go unnoticed. Or, to the extent self-interested managers are successfully sued, there is little prospect for accountability. For example, if a board engages in a self-dealing transaction is sued, then discovery, the trial and then the opinion are all held in confidence - not disclosed via any court filing system and not filed with the SEC, except in the most cursory fashion. That can't be good for "price discovery." Who wants that kind of system? Bad actors.
So, count me down as a "no" if the SEC is still actively considering this bad idea.
Monday, October 22, 2018
Ok, so Akorn has attracted a lot of attention - as it should. It's the first ever MAC seen in the wild. Of course, the Chancery opinion is going to get appealed, so it's not the last word on the issue. But for now, there it is and its facts are interesting. At the same time, there is another MAC case percolating in Chancery. You might remember I noted the Channel Medsystems v. Boston Scientific case. I pooh-pooh'ed the claim that an apparent embezzlement of $3 million was not a MAC/MAE under the current understanding of the law. So, is this where I eat crow? Uh...no. Here's why:
In Channel, the underlying claim is that a Vice President of Quality Assurance embezzled some $3 million from Channel. In order to cover his tracks, he apparently made up/forged receipts for stuff that was never purchased and, importantly, tests that were never conducted. All of this became known after signing of the agreement. In fact, in a surprising coincidence it came to light at basically the same time the problems with Quality Assurance came to light at Akorn. In Akorn, the blame was pinned on the VP for Quality Assurance, just like in Channel. In Akorn, those problems called into question the viability with the FDA of basically all of Akorn's products. In Channel, there is only one product, so that looks the same too. This is starting to look eerily like Akorn Part Deux. OK, Quinn, seems like it's time to eat some crow. Except it's not.
Channel is single product company where the product is still in development. At the time of the deal, getting a good sense of the valuation is hard because the company only has value if the FDA approves the project. That's reflected in the structure of the deal. The deal is basically structured as put/call rather than a typical merger. The transaction has an outside date of Sept 29, 2019. If, before the outside date, the FDA approved Channel's product, then Channel has an option to put the company to Boston Scientific for some $250 million, and Boston Scientific has a reciprocal call option. That's critical.
Boston Scientific is arguing that the embezzlement and the accompanying cover up by the VP has resulted in an MAE and so it's termination of the agreement was proper. Channel is seeking a declaratory judgment that the embezzlement was not an MAE and that the FDA will approve the company's product in the first quarter of 2019.
Let me skip to the chase. If the embezzlement and cover up is material, then one should expect the FDA to refuse to approve the product on schedule and the contracted September 29, 2019 outside will come and go without an approval, and Boston Scientific would not be required to complete the transaction since Channel's put option would not vest. If the embezzlement is not material, then the FDA will approve the product before the outside date and then Channel will put the company to Boston Scientific. In any case, this particular contract has a competent third party ready to do their thing - that is evaluate and determine whether Channel's product should be able to be sold on the market. Terminating the contract now, claiming there is a MAC, seems premature.
In the claim before the court right now, Boston Scientific's argument looks a lot more like buyer's remorse than it does a MAC. Because if the effect of the embezzlement was really bad, then under the terms of the contract, Boston Scientific will never have to close. If it's not and the product is approved before the outside date, there is no reason for Boston Scientific not to close.
Anyhow, that's how I see it, buyer's remorse, not a MAC.
Wednesday, October 10, 2018
Sorry, catching up. It's a 247 page opinion for Chrissakes! It takes a guy some time to read that and the footnotes! What?! 800 plus footnotes? What are we doing here? Anyway, as this case is no doubt going up for appeal, the Chancery opinion is not going to be the last word on this. Nevertheless, here we go.
So, for those of you not paying attention, in Akorn v. Fresenius Vice Chancellor Laster found - for the first time - that a buyer properly terminated a merger agreement after finding that a seller had breached a representation and that a material adverse effect had occurred. There are a couple of things, I think, worth thinking about at least initially.
First, it's pretty clear that early on the seller, Akorn, was running into market headwinds. The business did not perform nearly as well as it had previously due to the entrance of new competitors in the generics business. This poor performance caused Fresenius to worry and to experience some "buyer's remorse." You'll remember from IBP v Tyson and other cases, buyer's remorse is never going to be enough to cause a MAC. Nevertheless, seeing the poor performance, Fresenius sought opinion of counsel whether that might be sufficient cause for them to walk away from the deal. Correctly, in my view, NY counsel told them, "No." They were in the business for all its ups and downs and the fact that others entered the market causing Akorn to suffer was not going to be the kind of thing that could permit Fresenius to walk away.
Then, a fraud was uncovered. An anonymous letter revealed that, basically, all of Akorn's quality assurance programs were basically a fraud. This is a whole different kettle of fish. The effect of having basically faked its quality assurance programs meant that all of the data sent to the FDA were unreliable and that approvals granted to Akorn's drugs and pipeline are now in jeopardy of being pulled. "How about now?", asked Fresenius of its outside counsel. Well, if you are buying a drug company that, post-signing, reveals that it lied to the FDA and that its drugs are no longer going to be marketable for a, what's the word?, a yes, "durationally significant" period of time, that starts to look like what a MAC should look like. A first for Delaware.
Actually, if the facts as outlined in this opinion aren't a MAC, then you'll never find one. This shouldn't even be close. I'm sure there's a line to be crossed - this is a MAC and this isn't - and if there is, these facts are well over that line.
In any event, I don't want to spend too much time on it. It's going to get appealed and the Delaware Supremes are going to want to have the last word on what a MAC looks like. Thankfully, they constrain themselves to opinions under 40 pages.
Since Kahn v. M&F Worldwide there have been a series of challenges to the application of the business judgment presumption in the context of controller squeezeout transactions. The crux of these challenges was M&F's ab initio requirement.
You'll remember that in M&F, the court tried to iron out the problems associated with the Kahn v. Lynch standard that were essentially flypaper for litigation in controller squeezeout transactions. It didn't matter how good a job you might have done in structuring a transaction to look like an arm's length deal, under Lynch your deal was still going to be subject to entire fairness review and you were going to get sued. Although entire fairness was the standard of review for a controller squeezeout with robust procedural protections (approval by disinterested special committee or stockholders), Lynch shifted the pleading burden to plaintiffs rather than the board. That was a mistake by the Del. Supreme Court. Rather than reward boards and give controllers an incentive to do the right thing, shifting the burden of proving entire fairness to plaintiffs simply ensured plaintiffs would sue and demand their day in court - guaranteeing that even meritless litigation had settlement value.
M&F sought to address this problem adopting the following standard:
[B]usiness judgment is the standard of review that should govern mergers between a controlling stockholder and its corporate subsidiary, where the merger is conditioned ab initio upon both the approval of an independent, adequately-empowered Special Committee that fulfills its duty of care; and the uncoerced, informed vote of a majority of the minority stockholders.
Of course, no good deed goes unpunished. What does ab initio mean anyway? Does it mean that if the controller's first proposal to the board doesn't stipulate the M&F conditions that the transaction must be subject to entire fairness review under Lynch? Or is it more forgiving than that? The Chancery Court has taken the position in a series of cases that ab initio should not be read so rigidly. Now, the Delaware Supreme Court has agreed. In Flood v. Synutra, the Court yesterday clarified what it meant by ab initio:
Admittedly, our opinion and the Court of Chancery’s opinion in MFW uses what can be read as ambiguous language to express the requirement that the key dual procedural protections must be in place before economic negotiations so the protections are not used as a bargaining tool in substitution for economic concessions by the controller. In describing this prerequisite to the invocation of the business judgment rule standard of review, we and the Court of Chancery have said the conditions must be in place “ab initio,” before the “procession of the transaction,” “from inception,” “from the time of the controller’s first overture,” and “upfront.”
From these uses, the plaintiff argues that MFW strictly hinges the application of the business judgment rule on the controller including the two key procedural protections in the first offer. A controller gets one chance, as the master of its offer, to take advantage of MFW, and if it fails to do so, that is it. But in an earlier case, the Court of Chancery and we did not embrace this rigid reading of MFW. In the case of Swomley v. Schlecht, the Court of Chancery held that MFW’s “ab initio” requirement was satisfied even though “the controller’s initial proposal hedged on whether the majority-of-the-minority condition would be waivable or not” because the controller conditioned the merger on both of MFW’s dual requirements “before any negotiations took place.” We affirmed that well reasoned conclusion, and adhere to that approach[.]
Rather than read ab initio literally and rigidly, the Court wants controllers and boards and, most especially potential plaintiffs to have a more flexible reading of ab initio:
A goal scored in the fifth minute of a 90-minute game would be referred to as a goal at the beginning of the match. Enjoying the beginning of fall refers to those few weeks in late September and early October when the weather gets chilly and the leaves start to change color, not just the autumnal equinox. The beginning of a novel is not the first word, but the first few chapters that introduce the reader to the characters, setting, and plot. Indeed, three years after Britain entered World War II, Winston Churchill famously declared that the War had reached “the end of the beginning.”
So, perhaps this is the beginning of the end of litigation in properly structured controlling shareholder transactions.
Thursday, September 20, 2018
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.
Wednesday, September 19, 2018
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.
Friday, September 14, 2018
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!
Thursday, September 13, 2018
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.
Wednesday, September 12, 2018
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:
Monday, April 23, 2018
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
Please submit an abstract or draft of an unpublished paper to Anne Tucker, firstname.lastname@example.org 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, email@example.com or (404) 413.9179.
Monday, April 2, 2018
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.
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.
If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to firstname.lastname@example.org 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.
Any questions concerning the workshop should be directed to the organizers: Jessica Erickson (email@example.com), David Webber (firstname.lastname@example.org), Verity Winship (email@example.com), and Jim Park (James.firstname.lastname@example.org).
Friday, August 18, 2017
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 email@example.com.
Friday, April 21, 2017
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
Tuesday, April 4, 2017
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.
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.
If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to firstname.lastname@example.org 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.
Any questions concerning the workshop should be directed to the organizers: Jim Park (James.email@example.com), Jessica Erickson (firstname.lastname@example.org), David Webber (email@example.com) and Verity Winship (firstname.lastname@example.org).
Tuesday, February 7, 2017
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.
Tuesday, January 17, 2017
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.
Thursday, January 5, 2017
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.
Friday, July 29, 2016
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 email@example.com.