Paul J. Shim

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On March 30, 2022, the SEC voted 3-1 (Commissioner Peirce dissenting) to propose a package of rules and rule amendments governing special purpose acquisition companies (SPACs), SPAC initial public offerings (IPOs) and SPAC mergers with a target company (de-SPACs).  Part of the proposed amendments would also apply to any shell company business combination, whether or not a SPAC is involved.
Continue Reading SEC SPAC Proposal

In a recent opinion addressing the enforcement of trading restrictions (“lock-ups”) that are commonly agreed in connection with a business combination transaction between a special purpose acquisition company (“SPAC”) and a target company (“de-SPAC transaction”), the Delaware Court of Chancery determined that the restrictions at issue did not apply to certain shares held by the…

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

As we look back on the mergers and acquisitions landscape of 2020, clear trends emerge and paint a picture of what can be expected in 2021. Certain of these trends seemingly came…

In an important decision for M&A professionals and other board advisors, the Delaware Court of Chancery addressed a stockholder plaintiff’s claims that the target board’s financial advisor and law firm, as well as the private equity buyer, aided and abetted a breach of fiduciary duty by the target board in connection with a take-private merger.  See Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. June 1, 2020).  While the claim against the financial advisor was allowed to proceed, the claims against the law firm and buyer were dismissed.  These diverging results provide early guidance as to when the Delaware courts will (and when they will not) dismiss aiding and abetting claims.  In many cases, the determining factor will be whether the complaint pleads facts raising a reasonably conceivable inference that the advisor, buyer, or other third party knew the board was engaging in a breach of its fiduciary duty.  This has important implications for the way board advisors and M&A buyers should approach a situation in which they become aware that the board of a target company is unaware of some material fact that could conceivably affect its ability to fulfill its fiduciary duties.
Continue Reading Knowledge Is Key: Recent Decision Addresses Aiding and Abetting Claims Against Board Advisors And Buyer

Last month, we described the increased threat of activists and acquirors seeking to capitalize on the COVID-19 sell-off to build positions in high-value companies at depressed prices.  Even before the current crisis emerged, we recommended that all U.S. public companies regularly review their defense profile and have a shareholder rights plans “on the shelf.” For companies uniquely impacted by the crisis—especially those whose market capitalization has fallen below $1 billion—we suggested they re-assess their vulnerabilities in this new environment and consider whether now was the right time to adopt a rights plan to ward off potential opportunistic behavior. Some companies have done just that—since March 1, 2020, 24 U.S. public companies have adopted a defensive shareholder rights plan (6 other U.S. public companies have adopted NOL rights plans).
Continue Reading ISS and Glass Lewis Issue Guidance for Poison Pills in COVID-19 Pandemic

Last week, the Delaware Court of Chancery upheld the terms of an agreement requiring The Chemours Company to arbitrate a challenge to its spin-off from DuPont. In doing so, Vice Chancellor Glasscock rejected Chemours’ claims that the process DuPont followed in structuring and executing the spin-off rendered the terms of the spin-off unconscionable and thus Chemours’ consent to arbitration ineffective.[1]  The Chemours decision is important as it recognizes that parent companies rely on the parent-subsidiary relationship in structuring spin-offs and in doing so need not follow an arm’s length process with its subsidiary as would apply to a transaction with an unrelated third party.
Continue Reading Don’t Bite the Hand that Feeds You: Delaware Court of Chancery Holds Spin-Offs Are Not Unconscionable

On March 30, 2019, Paul Shim and Jim Langston joined Patrick Ramsey, Global Head of M&A at BofA Securities, and Amy Lissauer, Global Head of Activism and Raid Defense at BofA Securities, on a conference call panel titled “The Impact of COVID-19 on Shareholder Activism and Hostile M&A.”

The panelists shared their views on the state of activism and hostile attacks in the current environment, how the activism playbook may evolve, when and how the next wave of activism and hostile attacks is likely to emerge, and what companies can do today to prepare for the storm.

Dial-in Details are as follows:
U.S. toll-free: 888 203 1112
International: +1 719 457 0820
Passcode: 1219818

The replay will be available from Monday, March 30, 2020, at 4:00 p.m. through Wednesday, April 29, 2020, at 2:00 p.m. Eastern.
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Continue Reading The Impact of COVID-19 on Activism and Hostile Attacks: Key Takeaways

Amidst a market-wide sell-off of public equities in the face of coronavirus uncertainty, companies across nearly every industry have witnessed significant declines in stock prices. As the market turbulence shows no signs of abating in the near term, public companies should consider turning to shareholder rights plans (or “poison pills”) to protect against hostile attacks.…

Last week, the Delaware Court of Chancery found that a target company in an agreed merger properly terminated the merger agreement following the passage of the specified “end date” where the buyer failed to exercise its right under the agreement to extend the end date.  See Vintage Rodeo Parent, LLC v. Rent-a-Center, Inc., C.A. No. 2018-0927-SG (Del. Ch. Mar. 14, 2019).  The decision is a stark reminder that courts will enforce the terms of a merger agreement as written, and that the failure to comply with seemingly ministerial formalities can have severe consequences.   
Continue Reading Target’s Termination of Merger Agreement Approved Based on Plain Contract Language

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