Merger Litigation

Subscribe to Merger Litigation via RSS

In a noteworthy new post-sale appraisal ruling, the Delaware Court of Chancery in BCIM Strategic Value Master Fund, LP v. HFF, Inc.[1] awarded the petitioner additional consideration based on an increase in the value of the target company that arose between signing and closing.  The unique facts of this case, and particularly the sustained outperformance of the target in the interim period before closing, are worth keeping in mind in evaluating the risk that a successful appraisal proceeding can increase the amount of consideration payable in a public company acquisition.  Below we break down the Court’s analysis in determining fair value, how changes in each merger party’s valuation drove the appraisal result, and key takeaways.
Continue Reading Appraisal Update: Post-Signing Value Changes Drive Appraisal Result

In Wei v. Zoox, Inc., the Delaware Court of Chancery found that an appraisal petition had been filed for the sole purpose of gathering discovery to be used in drafting a fiduciary duty complaint challenging a merger where the former stockholders had lost standing to seek books and records under Section 220 due to the rapid closing of the merger.  Nonetheless, in a novel ruling, the court permitted the appraisal petitioners to pursue some discovery in the appraisal action, limited to what would have been available to them under Section 220 had they not lost standing to seek such records.  The court rejected the petitioners’ request for broader discovery that is normally available in an appraisal action in light of its finding that the petitioners’ true purpose in filing the appraisal action was to seek Section 220-like books and records.
Continue Reading A Back-Door Section 220? Chancery Court Limits Appraisal Petitioners’ Demand for Broad Discovery

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…

In one of the first opinions addressing fiduciary duty claims in the context of a transaction involving a special purpose acquisition company (“SPAC”), the Delaware Court of Chancery determined that the SPAC shareholders’ right to redeem can be undermined by insufficient disclosures regarding the transaction and allowed class-action claims to continue against a SPAC’s controlling…

The Delaware Supreme Court recently affirmed the Court of Chancery’s 2020 decision in AB Stable VIII LLC v. MAPS Hotels & Resorts One LLC, which blessed a buyer’s termination of a merger agreement on grounds that the target breached its covenant to operate its business in the ordinary course between signing and closing.  In this closely watched appeal, the Delaware Supreme Court held that the ordinary course covenant in this case was breached because of the unprecedented steps the target hotel company took in response to COVID-19, even though the court found those steps to have been reasonable and consistent with the actions of others in the same industry.  This decision provides important guidance both in terms of how such covenants should be drafted but also how to deal with unprecedented crises between signing and closing.[1]
Continue Reading The Delaware Supreme Court Speaks on “Ordinary Course” Covenants

Bumpitrage in UK bids being implemented by scheme of arrangement. So-called “bumpitrage” refers to the intervention of a shareholder activist in a public bid to attempt to force the bidder into improving the terms of the bid. Most public bids in the UK market are implemented by scheme of arrangement. When it becomes effective, a…

Cleary Gottlieb’s “2020 Developments in Securities and M&A Litigation” discusses major developments from 2020 and highlights significant decisions and trends ahead.

In Liu v. SEC, the most notable securities decision of 2020, the Supreme Court cemented but limited the SEC’s authority to seek disgorgement as “equitable relief” for a securities law violation.…

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

As the 25th anniversary of the seminal Delaware Court of Chancery decision In re Caremark Int’l Inc. Deriv. Litig. (Caremark) approaches, there has been a notable rise in the number…

In In re Nine West LBO Securities Litigation, Case No. 20-2941 (S.D.N.Y. Dec. 4, 2020), U.S. District Court Judge Jed Rakoff denied a motion to dismiss claims brought by the Nine West liquidating trustee against former directors of Jones Group (the predecessor to Nine West) for breach of fiduciary duty and aiding and abetting breach of fiduciary duty stemming from a 2014 going-private transaction with private equity sponsor Sycamore Group.  While it remains to be seen whether the defendant directors ultimately will be found liable for such claims, we highlight certain lessons learned and best practices that can be followed in light of the ruling.
Continue Reading Lessons Learned and Best Practices in LBO Transactions Following the Nine West Decision