The German M&A market started off with a bang in the new year. RWE and E.ON are set to swap a large part of their businesses, with E.ON now planning to concentrate on grid and energy sales, and RWE on energy generation. The complex transaction has a reported total volume of around EUR 43 bn and includes E.ON’s acquisition of innogy, innogy’s break-up, and RWE’s approximately 16.7 % participation in E.ON, plus a settlement payment to E.ON of some EUR 1.5 bn. SAP plans to acquire the U.S. cloud provider Callidus for around EUR 2 bn. HSH Nordbank will be the first German Landesbank to be privatized, transferring into the hands of a syndicate involving J.C. Flowers and Cerberus for around EUR 1 bn. Deutsche See will soon belong to the fishery Parlevliet & Van der Plas. Bosch and Continental are joining the shareholder group of the navigation service Here, and Deutsche Telekom is founding a joint venture with the Zeiss group to develop data glasses. Continue reading.

On March 15, 2018, the UK Government published new merger thresholds to allow greater intervention in transactions raising national security concerns. The new thresholds will apply to firms that develop or produce items for military use, computer hardware, or quantum technology. The Government will be able to intervene in mergers in these sectors where the target’s UK turnover exceeds £1 million or the target has a UK share of supply of at least 25% (even where that share will not increase following the merger).

Please click here to read the full alert memorandum.

The general policy of the Delaware Limited Liability Company Act (the “Act”) is “to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.”[1]  Specifically, with respect to duties, the Act provides that to the extent law or equity would impose a fiduciary or other duty on a member or manager of an LLC, that duty may be “restricted or eliminated by provisions in the limited liability company agreement.”[2]  This flexibility makes LLCs an especially attractive vehicle for private equity investors, in particular with respect to allowing management and other minority holders to participate in an investment.

An LLC agreement, however, cannot eliminate the implied covenant of good faith and fair dealing that inheres in all contracts under Delaware law.[3]  As a result, for private equity funds and other controlling investors, a lurking concern has been whether the implied covenant potentially provides a mechanism for a minority investor to undermine or change the terms of an LLC agreement, including through the imposition of otherwise waived fiduciary duty-like obligations. Continue Reading The Peril of the Implied Covenant of Good Faith in LLC Agreements

Earlier this month, partners Jennifer Kennedy Park and Kimberly Spoerri participated in a panel co-hosted by The Conference Board and Cleary Gottlieb to discuss the board’s oversight role in issues related to sexual harassment.

Moderator Doug Chia, executive director of The Conference Board, Jen and Kim discussed relevant legal regulations and frameworks and the risks of non-compliance, as well as the policies, procedures and best practices boards and senior management can employ to mitigate risks.  They discussed the responsibility the board has in setting company culture through tone at the top, and how the failure by the board and senior management to be proactive in this area can affect compliance and oversight throughout a company.  The discussion also included ways the board can tangibly address these issues.  Continue Reading Cleary Partners Participate in Panel Discussion on Board Oversight of Sexual Harassment

We were grateful that approximately 200 of you participated in Cleary Gottlieb’s fourth annual M&A, Antitrust and the Board Room conference at the Federal Reserve building in San Francisco, hosted and co-sponsored by our friends at Berkeley Law School, as well as sponsors Innisfree M&A and MacKenzie Partners.

The day featured:

  • SEC Commissioner Robert Jackson’s delivery of his controversial “The Case Against Corporate Royalty” speech, a thought-provoking follow-up talk by Doug Rushkoff, author of Throwing Rocks at the Google Bus, and a discussion with Michael Ronen, a leader of the Softbank Vision Fund; Lev Finkelstein, head of corporate finance at Dropbox; Wanji Walcott, general counsel of Paypal; Jean Rogers, chair of SASB; and Cleary partner Ethan Klingsberg.
  • A vigorous debate about the role of innovation in antitrust merger review among Thomas Deisenhofer, EC Head of Merger Control; Richard Gilbert, former Deputy Assistant AG for Economics; Bruce Hoffman, Acting Director at the FTC’s Competition Bureau; and Cleary partners George Cary and Elaine Ewing.
  • A candid dialogue between Vice Chancellor Tamika Montgomery-Reeves and Cleary partner Kim Spoerri about the nuances and future directions of Delaware fiduciary duty litigation.
  • The latest from the front lines of proxy contests and activism defense from MacKenzie CEO Dan Burch and Innisfree Managing Director Scott Winter, as well as Anne Chapman, who recently joined Joele Frank after 20+ years of overseeing proxy voting at Capital Research; Yumi Narita of BlackRock; Zach Oleksiuk, who recently joined Evercore after leading BlackRock’s corporate governance work; and Cleary partner Glenn McGrory.

Photos, a detailed recap of the day’s discussions, the agenda, and a list of participants can be found here.

Please do not hesitate to contact any of your friends at Cleary Gottlieb to follow up on any of the matters raised at the conference.

Maintaining a workplace environment free of discrimination, sexual harassment and other misconduct is critical to both the short-term productivity and long-term health of a business.  Reports of sexual harassment allegations at public corporations can have material negative effects on stock price, with some corporations seeing double digit single day drops after accusations are made public.  As we have written elsewhere, the primary obligation to manage these risks on a day-to-day basis falls to executive leadership.[1]  But the #MeToo movement also has raised questions about the role of boards of directors to provide oversight of management and, to the extent that senior management may be a source of the problem, the board’s obligation to take more direct action.

This note discusses some key issues for General Counsel to consider as they advise corporate boards about how to navigate their responsibilities in this environment.  Continue Reading Bringing The #MeToo Movement Into The Board Room

Last week, the Delaware Court of Chancery issued its first significant appraisal decision applying the Delaware Supreme Court’s recent Dell[1] and DFC[2] opinions, which we’ve previously discussed here and hereSee Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (“Aruba”).  Although Dell and DFC both emphasized that deal price will often be the best evidence of fair value in appraisal actions involving open, competitive, and arm’s-length mergers of publicly traded targets, neither case involved a merger where the transaction resulted in significant synergies,[3] which are excluded statutorily from the determination of fair value.[4]  Picking up where those cases left off, the court in Aruba, despite finding that the deal price was the product of an uncompetitive and flawed process, nonetheless found fair value to be significantly below deal price because the merger resulted in significant synergies.  The court instead found fair value to be equal to the pre-announcement market trading price of the public shares, which was 30% below the deal price.  Subject to any appeal from this decision, Aruba continues, and in the context of strategic mergers expands upon, the trend of substantially reducing appraisal risk for buyers of public companies. Continue Reading Delaware Court of Chancery Finds Fair Value in Appraisal Case To Be Unaffected Market Price

Disclosure of Ultimate Beneficial Ownership in German Companies

Key Takeaways

  • Germany recently introduced new rules on the disclosure of the ultimate beneficial owner(s) of German companies. The rules are based on the 4th EU-Money-Laundering Directive (EU) 2015/849).
  • The rules are not only relevant for German entities and German shareholders, but also for foreign groups or organizations (including private equity groups) that have or intend to acquire holdings in German entities.
  • Recent experience indicates that not all foreign players eying German M&A targets or holding significant interests in German targets are aware of these rules.
  • If your group or organization
    • has or intends to acquire a direct or indirect holding of more than 25% of the capital or the voting rights of a German entity or otherwise controls such entity, and
    • is beneficially owned or controlled by one or more natural persons,

disclosure obligations with respect to the ultimate beneficial owners may apply and should be assessed. Continue Reading The German Transparency Register

Forbes has published an interesting article that opens as follows:

Every CEO and every board member of every publicly traded company (and every thinking-about-being-publicly traded company) should drop whatever they are doing and read two short things right now:

  • This week’s annual letter to CEOs from BlackRock chief executive Larry Fink; and
  • The January 8 client bulletin from Cleary Gottlieb, “The Schizophrenic Investor Landscape: The Significance for Boards and Management of the JANA/CalSTRS Letter to Apple.”

BlackRock is the largest investor in the world, managing $6 trillion in assets. Cleary is one of the largest and most prestigious international law firms in the world. These are two of the most influential institutions that drive the behavior of the corporations that shape our society and our lives. . . . Let’s hope . . . that investors are beginning to see—and will begin to act—more “Cleary”-eyed.

Click here for the Forbes article and here for the original Cleary blog post by our partner Ethan Klingsberg.

In recent months, sexual harassment allegations against well-known figures across a growing number of industries have become a common feature in news headlines.  In the wake of these allegations, many companies have concluded that their current policies and procedures related to sexual harassment and discrimination are inadequate.  Against the backdrop of this rapidly evolving landscape, companies are considering how to improve their policies and procedures not only to appropriately and effectively respond to allegations of sexual harassment, but also to deter inappropriate behavior going forward and foster an environment of openness, diversity and inclusion in their workplaces.  To that end, we address 8 key questions that companies should be asking themselves in developing policies and procedures to confront sexual harassment and other forms of misconduct in today’s workplace.

Click here, to read the full memo.