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

Following numerous speeches over the past several months by senior Department of Justice officials on their focus on the prosecution of individuals in investigations involving corporate misconduct and the importance of corporations disclosing evidence against individuals to receive cooperation credit in criminal investigations, on September 9, 2015, the U.S. Justice Department issued new guidelines aimed at prioritizing the Department’s focus on individual responsibility in both civil and criminal corporate wrongdoing cases.  The guidelines appear to reflect a push by the Department to strengthen efforts at obtaining penalties – including criminal penalties – against responsible individuals in addition to those that may be sought against the firms and companies involved in misconduct.  The guidelines supplement those set out in the 2007 memorandum from Deputy Attorney General Paul McNulty on “Principles of Federal Prosecution of Business Organizations.”  These new guidelines are a response to criticism that the Department has not been aggressive enough in prosecuting individuals post-financial crisis and are a must know for companies and individuals engaged in ongoing Department investigations others who could be the subject of investigation in the future, including companies and individuals in heavily-regulated industries. Continue Reading U.S. Justice Department Issues New Guidelines Prioritizing Individual Liability For Corporate Wrongdoing

Continuing the long line of precedent confirming the primacy of the board of directors in the governance of a Delaware corporation, the Delaware Court of Chancery recently invalidated a stockholder-adopted bylaw that attempted to grant stockholders the right to remove and replace corporate officers, even in situations where the corporation’s board of directors objected to such removal.  In a brief 25-page opinion,[1] Vice Chancellor Noble held that, although stockholders generally have the broad power to adopt and amend bylaws, that right is not unlimited and the bylaw at issue would “unduly interfere with directors’ management prerogatives under Section 141(a)” of the Delaware General Corporation Law (the “DGCL”). Continue Reading Gorman v. Salamone: Delaware Court of Chancery Strikes Down Bylaw Granting Stockholders the Right to Remove and Replace Officers

The FTC has settled an enforcement action against Third Point Funds and their management company related to their acquisition of stock in Yahoo! Inc.

Based on the FTC’s press release, the funds had acquired shares in Yahoo! that exceeded the requirements for pre-acquisition filings under the Hart-Scott-Rodino Act.  (Filing is currently required prior to acquiring more than $76.3m worth of shares.  Notice of the planned acquisition must be given to the target company prior to filing, potentially providing a very early notification to the target of the acquisition of its shares by an activist.)  To avoid this filing requirement, the Third Point funds relied on the “investment only” exception, which permits investors to acquire up to 10% of an issuer’s stock without observing the HSR Act’s notice and waiting period requirements – so long as the investor’s intent is passive. Continue Reading Third Point Settles FTC Enforcement Action – Will HSR Serve as Early Notice of Activist Stakebuilding?

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

The SEC’s conflict minerals rule was the subject of a new Court of Appeals decision this week, but for companies required to comply with the rule nothing has changed yet. Continue Reading Conflict Minerals: New D.C. Circuit Decision, but no Rule Changes – Yet

There has historically been very little reasoned consideration by the UK Courts of MAC conditions in English law SPAs.   In contrast, there have however been a number of cases in the US Courts (particularly in Delaware) which have considered MAC conditions.   The Delaware Courts have interpreted MAC conditions narrowly and in a seller friendly manner – the Delaware Court of Chancery in the important IBP v Tyson Foods decision for instance said that MAC conditions were “best read as a backstop protecting the acquirer from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally significant manner”.  The Delaware Courts have also been reluctant to allow a buyer to trigger a MAC condition on the basis that the target had underperformed vis a vis forecasts provided prior to execution. [1]

Continue Reading Can a Pre-Completion Downward Revision to the Target’s Forecasted Performance Constitute a MAC in an English Law SPA?

On May 5, 2015, Louise Parent, Of Counsel, was interviewed by Randy Milch about her ambitious path to general counsel of AMEX, how she successfully dealt with AMEX’s battle with Visa and Mastercard in the U.S., Europe, and Latin America, and how the role of general counsel has changed since 1993. Continue Reading Podcast: Vertical Promotion is Not Always Route to General Counsel

In a noteworthy decision by Vice Chancellor Parsons, the Delaware Chancery Court in Longpath Capital, LLC v. Ramtron International Corporation[1] set the fair value of the target company at the agreed merger price minus estimated synergies.

Continue Reading Chancery Court Awards Merger Price less Synergies in Appraisal Proceeding

In a well-reasoned memorandum opinion, the Delaware Chancery Court in Alliant Techsystems, Inc. v. MidOcean Bushnell Holdings, L.P.[1] provided to M&A practitioners a stark reminder to take extra care in crafting purchase price adjustment provisions, particularly in respect of their interplay with contractual indemnification clauses. Continue Reading Revisiting a Trap for the Unwary in Purchase Price Adjustments