The Supreme Court’s unanimous decision this week in Salman v. United States, No. 15-268, 580 U.S. __ (Dec. 6, 2016), clarified what constitutes a “personal benefit” for purposes of insider trading liability.  In its first merits ruling in an insider trading case in two decades, the Court affirmed the Ninth Circuit’s holding that the personal benefit requirement may be met when an inside tipper simply gifts confidential information to a trading relative or friend.  In so holding, the Supreme Court significantly narrowed a key aspect of the Second Circuit’s landmark insider trading decision in United States v. Newman, which had required prosecutors to prove that the tipper received something “of a pecuniary or similarly valuable nature”—a more difficult standard to meet.

Before Newman was decided, the United States Attorney’s Office for the Southern District of New York had prioritized insider trading prosecutions, obtaining dozens of convictions and over a billion dollars in fines since 2009.  After Newman, however, prosecutors were forced to dismiss several indictments, and some commentators wondered what the future held for insider trading prosecutions.  The Supreme Court’s recent decision should reduce that uncertainty and may bring a renewed focus on insider trading investigations.
Continue Reading Supreme Court Clarifies Insider Trading Liability for Confidential Tips

Several amendments were made to Section 251(h) of the Delaware General Corporation Law that became effective for merger agreements entered into on or after August 1, 2016.  Section 251(h) permits acquisitions of publicly listed Delaware corporations to be accomplished via a tender offer without the need to approve the second-step “squeeze-out” merger at a stockholder meeting if certain conditions are met, including that the acquiror of the tendered shares and its affiliates would be able to unilaterally approve the second-step merger if a meeting were to be held.
Continue Reading Smoothing the Pathway to Use of Tender Offers in Private Equity Acquisitions

On March 28, 2016, on remand from the First Circuit, the United States District Court for the District of Massachusetts held that Sun Capital Fund III and Sun Capital Fund IV were jointly and severally liable for the multiemployer pension plan withdrawal liability of their bankrupt portfolio company, despite the fact that these funds were not parallel investment funds, generally had different investors and neither fund individually held an 80% or greater ownership interest in the portfolio company.  Under the Employee Retirement Income Security Act or “ERISA”, an entity such as a corporation or a partnership engaged in a trade or business may have liability for pension liabilities of other entities in the same “controlled group”.  Although the rules are complicated and technical, entities that are under 80% or more common control with each other will generally be considered to be in the same controlled group for these purposes.  In the Sun Capital case, the District Court concluded that the funds’ coordinated efforts in forming the limited liability corporation through which they held their respective investments resulted in the funds having formed an undocumented general partnership-in-fact that was engaged in a trade or business.   As the 100% owner of the LLC formed by the funds, such de facto partnership was found to be in the portfolio company’s controlled group and its partners, the two funds, were held to be joint and severally responsible for the withdrawal liability of the portfolio company under general partnership unlimited liability principles.
Continue Reading Most Recent Sun Capital Decision Expands Reach of Controlled Group Liability Under ERISA

The EU has been on an accelerated transition towards a more climate-friendly energy sector since 2009.  EU Member States are committed to decrease CO2 emissions by 20% by 2020, and to increase generation from Renewable Energy Sources (“RES”) to mandatory targets.  After implementation of the Paris Agreement, these targets will likely be revised upwards, given the EU’s initial commitment for a 40% reduction of CO2 emissions by 2030.  Strong demand for clean energy, government support including subsidies and tax incentives, and governmental mandates create attractive opportunities for investment in RES generation and the transmission infrastructure needed to bring clean energy to users.
Continue Reading Investing in Energy in the EU – Navigating the Ownership Unbundling Rules

The past few years have witnessed a resurgence in the mergers and acquisitions and initial public offering markets—particularly for health care. Many private companies have pursued a dual-track M&A/IPO process, in which the company simultaneously pursues an IPO and a confidential sale. The dual-track process has been growing in popularity among health care companies, since the IPO process can be helpful in generating momentum for a potential sale in a consolidating industry.
Continue Reading Dual-Track M&A/IPO Gain Popularity in Health Care Sector

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

The recent up-tick in covenant lite financings in the European leveraged loan markets has caused some in the investor community to express concern about what impact it will have when the debtor becomes distressed. This article examines the causes of the recent trend, and dispels some of the myths about covenant lite in the context of a restructuring.

Continue Reading The Resurgence of Covenant Lite, and What it Means for the Restructuring Market