In a recent decision, the Supreme Court eliminated laches as a defense in patent litigation; as a result, defendants are more vulnerable to unexpected claims of patent infringement. Given this new layer of risk, it is even more important to conduct thorough and nuanced patent infringement diligence on an M&A target, and parties to M&A transactions should take this increased exposure to liability into account when negotiating the relevant representations and warranties and indemnities. Continue Reading No Laches, More Problems: Elimination of Laches in Patent Infringement Suits Increases M&A Risks
The Delaware Supreme Court has affirmed the Delaware Court of Chancery’s ruling that Energy Transfer Equity L.P. (“ETE”) did not breach its agreement to merge with The Williams Companies, Inc. when ETE terminated the agreement on the grounds that its counsel was unwilling to deliver a tax opinion that was a condition to closing.
While the court’s decision has been eagerly anticipated, the larger impact of the ETE/Williams matter occurred back in May 2016 when the dispute became public: the dispute highlighted that tax-opinion closing conditions which are intended to protect the parties against tax risks could instead add to deal risks.
This alert memorandum briefly describes the facts in the case and the court’s decision, and then turns to a survey of what deal counterparties have been doing differently to mitigate “ETE/Williams risk”. We end with a menu of features deal counterparties should consider using in future deals. These features include:
— No tax opinion required
— Tax opinions prepared before signing
— Closing condition limited to change in tax law
— Obligation to accept opinion from other party’s counsel or an alternate counsel
— Obligation to restructure if necessary to obtain tax opinion
— Termination fee for termination because of inability to obtain opinion
Please click here to read the full alert memorandum.
Appraisal rights in public M&A transactions have recently garnered greater attention, particularly in Delaware. As a result, more attention is being paid to the possible inclusion of a closing condition protecting the acquiror against excessive use of appraisal rights, and this should lead to careful attention being paid to the negotiation and drafting of any such conditions and related provisions. Discussed below are some of the reasons for this greater attention, and suggestions regarding negotiating and drafting such provisions. Continue Reading Negotiating Appraisal Conditions in Public M&A Transactions
Part 2: Risks Associated with Transfers of Personal Data and Post-Closing Integration
One aspect of mergers and acquisitions that is receiving growing attention is the relevance of privacy issues under U.S. and European Union (“EU”) laws as well as the laws of a growing number of other jurisdictions. This two-part blog post discusses the principal M&A-related privacy risks and highlights certain “traps” that are often overlooked. In Part 1, we discussed risks associated with a target’s pre-closing privacy-related liabilities and considered ways to mitigate these risks through adequate diligence and privacy-related representations in M&A agreements. In this Part 2, we discuss the risks associated with transferring or disclosing personally-identifiable information (“personal data”) of an M&A target (or a seller) to a purchaser (or prospective purchaser) and those associated with the purchaser’s post-acquisition use of such personal data.
Part 1: Risks Associated with the Target’s Pre-Closing Privacy-Related Liabilities
One aspect of mergers and acquisitions that is receiving growing attention is the relevance of privacy issues under U.S. and European Union (“EU”) laws as well as the laws of a growing number of other jurisdictions. This two-part blog post discusses the principal M&A-related privacy risks and highlights certain “traps” that are often overlooked. In this Part 1 of the post, we discuss risks associated with a target’s pre-closing privacy-related liabilities and consider ways to mitigate these risks through adequate diligence and representations in M&A agreements. In Part 2, we will discuss the risks associated with transferring or disclosing personally-identifiable information (“personal data”) of an M&A target (or a seller) to a purchaser (or prospective purchaser) and those associated with the purchaser’s post-acquisition use of such personal data.
In a recent ruling (Halo Elecs., Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc.), the Supreme Court adopted a relaxed and more plaintiff-friendly standard for determining whether to award enhanced damages in patent infringement litigation. This ruling should be taken into account when considering allocation of patent infringement risks in M&A transactions, including in connection with representations and warranties and associated indemnities. Continue Reading Halo’s Enhanced Patent Infringement Damages Bring Enhanced M&A Risks
In a decision with important consequences for merger and acquisition transactions and the litigation resulting from those transactions, a divided New York Court of Appeals held last week that the common interest doctrine applies only to post-signing, pre-closing communications between parties to a merger agreement if they relate to pending or anticipated litigation. Other communications between separately represented parties to a merger (or other commercial transaction) are not entitled to privilege under New York law. Continue Reading New York’s Highest Court Holds Common Interest Doctrine Inapplicable to Commercial Transactions Absent Litigation
The recently introduced “Brokaw Act” that proposes changes to the rules governing the reporting of ownership in U.S. public companies would expand the definition of “beneficial owner” to include any person with a “pecuniary or indirect pecuniary interest”, including through derivatives, in a particular security (borrowing the concept from the SEC’s insider reporting regime, which captures the “opportunity to profit” from transactions related to the relevant security). If passed and ultimately adopted, these changes would have a significant impact on the reporting obligations of investors by expanding the types of interests that would be counted toward the 5% threshold requiring the filing of a Schedule 13D. Because indentures often incorporate by direct reference the 13(d) concept of beneficial ownership, expansion of the definition could have ripple effects beyond increased public ownership filings. Continue Reading Indentures and the Brokaw Act: Will Expanding the Definition of Beneficial Ownership Broaden Change of Control Triggers?
Companies based in the People’s Republic of China have committed to over $100 billion of overseas acquisitions since January 1, 2016, including a number of high profile targets in the United States and Europe. The ties of these buyers to governmental entities in the PRC, coupled with the unpredictability of the PRC government, and the challenges that a non-PRC counterparty faces when seeking to enforce contractual obligations and non-PRC judgments in PRC courts has led practitioners to implement an array of innovative provisions in M&A Agreements. Continue Reading How M&A Agreements Handle the Risks and Challenges of PRC Acquirors
Updating our recent posting concerning the enforcement of disclaimers of extra-contractual liabilities under Delaware law, in FdG Logistics LLC v. A&R Logistics Holdings, Inc. (Del. Ch. Feb. 23, 2016) the Delaware Court of Chancery held, in the context of a motion to dismiss, that any such disclaimer must be unambiguously expressed as a statement by the aggrieved party in order to be effective.
FdG Logistics arose out of the purchase of a trucking company by a private equity firm through a merger transaction. The purchaser alleged that the target company “engaged in an extensive series of illegal and improper activities that were concealed from it during pre-merger due diligence” and asserted, among other things, that the selling securityholders had committed common law fraud based on alleged misrepresentations in extra-contractual materials, including a confidential information memorandum and a management presentation. Continue Reading Another Update on Disclaimers of Extra-Contractual Liability in Delaware