Deal Structuring

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This article was originally published in The M&A Lawyer, Vol. 19, Issue 7.

So-called representation and warranty insurance (“RWI”) has been an often-discussed innovation in M&A circles for several years, with seemingly perpetual speculation that a mature market for the product is just over the horizon. In the last few years, however, M&A practitioners have seen a notable increase in the number of policies priced and bound. A number of factors have led to this increase, including improvement in the pricing of policies by carriers against historical levels, expansion of coverage terms by carriers that bring the policies’ terms closer to a traditional seller indemnity and buyers’ increasing familiarity with the product and increasing comfort in carriers’ track records in paying claims, not to mention the general rebound in M&A activity since the recession.
Continue Reading Practical Tips to Navigate the Developing Market of Representation and Warranty Insurance

In a recent Delaware Chancery Court decision, Vice Chancellor Laster considered yet another challenge to the approval by a “conflicts committee” of a master limited partnership (“MLP”) in the energy sector of a transaction with the MLP’s parent company. Although the Vice Chancellor noted criticism of the process undertaken by the conflicts committee as portrayed in the complaint by holders of the publicly-traded  units of the MLP, the Court nonetheless dismissed the complaint due to the limited ability to challenge the transaction under the partnership agreement (which was typical for MLPs).
Continue Reading Pendulum Swings the Other Way in New Conflicts Committee Decision, But Scrutiny and Criticism of Independent Directors Continues

In Miramar Police Officers’ Retirement Plan v. Murdoch[1] the Delaware Court of Chancery dismissed plaintiff’s claims, refusing to hold that an “unambiguous” boilerplate successors and assigns clause operated to bind a spun-off company to the terms of a contract entered into by its former parent company.  The contract at issue generally restricted the former parent company from adopting a poison pill with a term of longer than one year without obtaining shareholder approval.  The decision will serve as a reminder to practitioners to carefully consider  the impact that significant corporate transactions could have on their clients’ contractual rights and obligations. 
Continue Reading Successors, Assigns and Spincos, Oh My!: Binding Spincos to Parent Obligations Requires Specificity

In his recent decision in In Re: El Paso Pipeline Partners, L.P. Derivative Litigation [1], Vice Chancellor Laster awarded $171 million in damages to the limited partners of a master limited partnership (“MLP”) that had challenged the MLP’s acquisition of  assets from a related party.   The transaction at issue — a so-called “dropdown” of assets — involved the sale to the MLP by its controller and general partner (El Paso Corporation) of certain LNG-related assets in exchange for approximately $1.41 billion in cash.
Continue Reading Related Party Transactions – Lessons from the El Paso MLP Decision

The widespread practice in private acquisitions of combining a “subsidiary merger” acquisition structure with release, indemnification, and escrow arrangements, which purport to bind the target stockholders, received a jolt from the Delaware Court of Chancery’s recent decision in Cigna v. Audax.
Continue Reading Wake Up Call for Private M&A Deal Structuring

In a typical public company merger agreement, the target is required to continue to operate in the “ordinary course of business” prior to closing.  This covenant provides protection for the buyer who is obligated to complete the acquisition subject only to the fulfillment of limited closing conditions, including, typically, the non-occurrence of a “Material Adverse Effect,” and wants some certainty as to what it will be acquiring come the closing. 
Continue Reading Operating in the Ordinary Course of Business after an Extraordinary Event: Cooper Tire & Rubber v. Apollo (Mauritius) Holdings

Chancellor Leo Strine’s opinion in In re MFW Shareholders Litigation (Del Ch. May 29, 2013) marks the culmination of an effort by the Chancellor, going back to his lengthy dicta in In re Cox Communications Shareholders Litigation (Del Ch. 2005), to arrive at a more unified standard for review of buy-outs of a company’s public float by a controlling stockholder.  The headline conclusion is that, assuming this decision is not reversed by the Delaware Supreme Court on appeal, controlling stockholder buyouts structured as negotiated mergers may now join controlling stockholder buyouts that take the form of unilateral tender offers in having available a theoretical path that permits challenges to be dismissed on pre-trial motions.
Continue Reading Controlling Stockholder “Going Private” Transactions after In Re MFW: Reasons to Be Wary of the Path to the Business Judgment Rule

Amendments to the Delaware General Corporation Law are now formally before the legislature. Two provisions – one relating to defective corporate authorizations and the other to mergers – will be of particular interest, as will the potential traps that may arise in connection with the merger statute amendment.
Continue Reading Traps to Consider: Delaware’s Merger Statute and Ratification Amendments

On March 27, 2013, China’s Ministry of Commerce (“MOFCOM”) published for public comment “Rules on Attaching Restrictive Conditions to Concentrations between Undertakings (Draft for Comment)” (the “Draft Rules”). As the first comprehensive guidance on merger remedies under the Chinese Anti-Monopoly Law (the “AML”), the Draft Rules address a wide range of issues, including the design, implementation, monitoring, modification and waiver of merger remedies, as well as liability for breach.
Continue Reading MOFCOM Solicits Comments on Draft Merger Remedies Rules