October featured significant M&A opinions from Delaware that are already having an impact on board processes and relationships between corporations and their financial advisors.  While the most recent opinion dismisses claims against the financial advisor for aiding and abetting breaches of duties by the target board, a careful reading of the case reveals that the decision is unlikely to change the practical impact of the holdings from earlier in the month. Continue Reading What Do the Recent Delaware Opinions Mean for Corporate Board Processes and Relationships with Financial Advisors?

Cleary Gottlieb partner Ethan Klingsberg took part in a roundtable discussion for Corporate Disputes magazine on “Resolving Boardroom Disputes,” offering practical advice on how to have constructive and harmonious board processes, even when there are directors from hedge funds or other specific constituencies.

Read the full article from the October-December 2015 issue of Corporate Disputes here.

At this week’s 47th Annual Securities Reg Institute, Ethan Klingsberg will lead the panel, Activism in 2016: Understanding the Dynamics of the Changing Landscape and Changing Roles.  In addition to covering the most recent case law and market developments, Ethan will be discussing with

  • Michele Anderson, member of the senior leadership team at the Division of Corporation Finance of the SEC—issues ranging from the most effective ways to prompt the SEC staff to take action when there are missteps or misleading statements being made by a hostile party to the latest thinking on a spectrum of Section 13(d) issues relevant to the activism landscape;
  • Eileen R. Cohen, Chair of the Proxy Committee & Senior Portfolio Manager of JPMorgan Asset Management—institutional investor perspectives on shareholder engagement, relationships between activists and institutional investors, the presence of an activist on the board, golden leashes, and the impression made on institutional investors of tactics employed by activists and corporations;
  • Carmen Molinos, Managing Director at Morgan Stanley—DOs and DON’Ts for meetings with activists, recent experience with working through the settlement vs. fight calculus, and managing and integrating activists in the boardroom;
  • Charlie Penner, Partner & Chief Legal Officer at Jana Partners—the latest activist playbook, communications between activists and management, latest trends in standstill and settlement agreements, and managing the dual fiduciary conflicts that an activist director faces when on a board of a public company; and
  • Jim Snyder, former SVP & General Counsel of Family Dollar Stores and former head of litigation at Home Depot—role of the general counsel in preparing the board for activism, managing IR and board processes in an activist scenario, how to make short-term NDAs with activists work, managing information flow to an activist director, deflating an activist director’s “shadow management” risk, and when to adopt and not to adopt a poison pill in response to an activist.

Here are links to the presentation material, a video overview and information on location and webcast.   The panel will take place from 2:15pm eastern to 3:45pm eastern time on Wednesday, October 28.

I. The German M&A Market – a Seller’s Market

Germany has long been an attractive market for both strategic and financial investors. This is due to a number of reasons. The German economy is traditionally shaped by highly regarded blue chips with strong brand recognition and “quality perception” as well as successful small and medium-sized companies (Mittelstand), many of them global market leaders in industrial niche markets. Germany is also considered as – and continues to prove itself to be – a stable and solid hub in a European market environment that, due to the never-ending Euro crisis, the Crimea/Ukraine crisis and other crises, has not ceased to be turbulent and volatile. More recently, the USD/EUR exchange rate has added to Germany’s attractiveness for inbound M&A transactions. Continue Reading Current Trends in German M&A

Re-affirming the significance of stockholder approval in corporate governance, the Delaware Supreme Court recently held that transactions approved by a fully informed, uncoerced stockholder vote will be reviewed under the business judgment rule when not subject to the entire fairness standard of review.  Corwin v. KKR Fin. Holdings LLC, No. 629, 2014 (Del. Oct. 2, 2015).  Last Friday, the Court unanimously affirmed Chancellor Bouchard’s dismissal of a post-closing damages action in In re KKR Fin. Holdings LLC S’holder Litig., 101 A.3d 980, 1003 (Del. Ch. 2014).  The opinion by Chief Justice Strine canvassed Delaware authority from as far back as 1928 to find extensive support for the proposition that “the approval of the disinterested stockholders in a fully informed, uncoerced vote that was required to consummate a transaction has the effect of invoking the business judgment rule.”  Op. at 7-8 n.19. Continue Reading Corwin v. KKR: The Significance of Stockholder Approval

Addressing motions to dismiss in connection with the acquisition of Zale Corporation by Signet Jewelers, Vice Chancellor Parsons (in In Re Zale Corporation) dismissed claims against the Zales directors (under DGCL §102(b)(7)) and Signet, but denied dismissal of claims against Zales financial advisor.  Based on the allegations in the plaintiffs’ complaint, before being engaged, the financial advisor told the Board it had “limited prior relationships and no conflicts with Signet,” even though it had received approximately $2 million in fees in the year before the merger agreement.  More significantly for the Court, the complaint alleged that the financial advisor did not disclose – until after the merger agreement was signed – that it had made a presentation to Signet advocating a purchase of Zales shortly before Signet approached Zales, and that a senior member of the team that presented to Signet later became a member of the team that advised Zales. Continue Reading Further Chancery Court Guidance on Financial Advisor Aiding and Abetting Claims

For practitioners in the Delaware Court of Chancery, the facts of In re Riverbed Tech., Inc.[1] are all too familiar.  After Thoma Bravo sought to take Riverbed private, a class of stockholders challenged the transaction, claiming that the company had been undervalued, the sales process was undermined by conflicts of interest, and the disclosures in the preliminary proxy statement were inadequate.  As in many other cases—after all, litigation has become a virtual certainty in large merger and acquisition transactions of public companies[2]—Riverbed agreed to make supplemental disclosures before the stockholder vote and pay plaintiffs’ attorney’s fees, in exchange for defendants receiving a broad release from liability for all claims arising from the transaction.  Although Vice Chancellor Glasscock reduced the amount of attorney’s fees awarded due to misgivings about the value of the benefits achieved in light of the broad scope of the release, he approved the settlement. Continue Reading The Implications of Riverbed for Disclosure-Only Settlements

On September 28, 2015, NYSE amendments to Section 202.06 of its Listed Company Manual will take effect. The Section governs the circumstances under which companies must notify the NYSE at least ten minutes before disseminating material news and gives the NYSE authority to halt trading in a listed company’s securities. The amendments require listed companies to now notify the NYSE of material news beginning at 7:00 am (instead of only during market hours) and give the NYSE additional discretion to impose trading halts. Continue Reading Amendments to NYSE Material News and Trading Halt Policies

On Aug. 18, 2015, a divided panel of the D.C. Circuit Court of Appeals in National Ass’n of Manufacturers v. U.S. Securities and Exchange Commission (Minerals II) reaffirmed its April 2014 decision that the SEC’s conflict minerals rule, and the underlying provision of the Dodd-Frank Act, violate the First Amendment to the extent they require a company to report to the SEC, and to state on its website, that any of its products have “not been found to be ‘[Democratic Republic of the Congo] conflict free.’”[1]  The panel had agreed to reconsider the case because of an intervening en banc decision of the full D.C. Circuit in another case, American Meat Institute v. U.S. Department of Agriculture (Meat II),[2] which raised a similar First Amendment challenge to USDA requirements for labeling meat products. Continue Reading Mixing Meat And Minerals On Compelled Commercial Speech