February 9, 2016

Joseph Slights Tapped as Next Delaware VC

Here’s news from this DelawareOnline article:

Gov. Jack Markell has nominated former Superior Court judge Joseph R. Slights III to be the next vice chancellor of the Delaware Court of Chancery. If confirmed, Slights will replace Vice Chancellor John W. Noble, who is retiring later this month.The state Senate will have to approve his nomination after the legislative session resumes in March.

A former Judge of the Delaware Superior Court, Slights returned to private practice at Morris James as a partner in the firm’s Corporate and Commercial Litigation group. Since returning to private practice, he has specialized in complex commercial and corporate litigation before the Chancery and Superior courts as well as the United States District Court for the District of Delaware. He also chairs Morris James’ alternative resolution practice group, serving as a mediator and arbitrator in business disputes.

Slights is a Dover native and has an associate’s degree from Wesley College, a bachelor’s from James Madison University and law degree from Washington and Lee University. Prior to joining the bench, he was a trial litigator at Richards Layton & Finger and Morris James when it was known as Morris James Hitchens and Williams. Former Gov. Tom Carper appointed Slights to Superior Court in 2000. In 2014, Slights submitted an application to replace outgoing state Supreme Court Justice Carolyn Berger, but Markell ultimately selected former Superior Court President Judge James T. Vaughn III.

February 8, 2016

Secrets of the Activist Manager

In “Secrets of the Activist Manager,” PwC’s Larry Jones and Joseph Duerr draw from a new analysis of 55 companies over the past 10 years in which shareholder activists had a significant impact on company governance and strategy – and compared their performance to that of their industry peers. In five industries, they found that highly activated companies grew revenues much more slowly than their non-activated peers in the same time frame. To effectively combat shareholder activism with a short-term view, they advocate a 3-step approach for management to follow: First, evaluate, systematically and dispassionately, where the opportunities for value creation exist. Second, evaluate and execute options to deliver on those opportunities. And finally, communicate the growth plan to value-oriented investors.

Also see this NY Times’ piece entitled “Remaking Dow and DuPont for the Activist Shareholders”…

February 4, 2016

Activist Activity: Three Perspectives

On the heels of the NACD’s annual survey of more than 1,000 directors, which found that more than 20% of respondents’ boards were approached by activist investors during the past year – yet 46% of those surveyed have no plan in place for responding to activist investor challenges – comes this Reuters article that says companies are settling with hedge fund activists at the fastest pace since the financial crisis. Then there is this WSJ piece entitled “Are Activist Investors Helping or Undermining American Companies?” – here’s an excerpt from that:

The Journal looked at 71 campaigns against companies with market capitalizations of more than $5 billion over a period dating back to 2009, the start of the surge of agitation. The review studied changes at these companies in earnings, margins, corporate spending, employee efficiency and shareholder return versus peers. The resulting data bolster the increasingly popular conclusion that the best corporate response to activism isn’t for a board or chief executive to reactively shun an activist, or to completely acquiesce to any demands. Instead, companies may be better off analyzing each proposal, and the track record of the activist making it, some advisers say.

“The focus is changing to whether the idea is good or bad,” says Avinash Mehrotra, co-head of Goldman Sachs Group Inc. ’s activism defense and shareholder advisory group. One key factor in judging an idea’s merits, he said, is the time frame an activist is demanding. The review shows that shares of large companies confronted by activists are more likely to outperform stocks among their industry peers than they are to underperform. But the differential isn’t great. Slightly more than half, or 38, of the situations in the Journal study led to better shareholder returns than industry peers for the period studied after the activist went public. In the end, the median campaign beat peers by just under 5 percentage points.

February 3, 2016

Tackling Cybersecurity in the Boardroom: Special M&A Considerations

Here’s an excerpt from this Akin Gump blog:

Companies are at increased risk during the time of an acquisition:

– They may not be fully investing in updates and system upgrades.
– Data shows an average of 200+ days for companies to detect advanced persistent threats, so the impact of a cyber deficiency in an acquired company may not be visible immediately.
– The acquirer may not be engaged sufficiently on cyber and information technology issues immediately after its investment to catch weaknesses and allocate resources quickly.

Directors who serve on multiple boards of directors face special issues:

– Cybersecurity is an enterprise risk management issue that must be evaluated to meet fiduciary duty standards.
– Boards cannot simply rely on management, and they should be aware of comparative cybersecurity practices with other companies on whose boards they serve.

February 1, 2016

Top 10 M&A Developments & Trends

From Cooley, here’s a list of Top 10 M&A developments and trends for 2016. Here’s an excerpt:

Private equity buyers, which have been relatively quieter in the markets due to high valuations, will likely be more active in 2016, as they seek new opportunities to buy unwanted assets or businesses (including those needing to be divested) from strategics. We also expect PE-to-PE sales and incremental add-ons to continue, assuming no major upheaval in the debt markets – a big assumption in the current environment.

We also expect cross-border M&A activity to continue unabated at high levels of volume in 2016 as deal makers continue to take advantage of, among other things, tax optimization and efficiency, fluctuations in currency prices (particularly in China) and pricing arbitrage from one country to another.

January 28, 2016

Court Decides Successor In Merger May Enforce Arbitration Clause

Here’s a blog from Allen Matkin’s Keith Bishop:

Can a party to written agreement that does not include an arbitration clause enforce an arbitration provision in another agreement to which it is not a party? Boiled down to the essentials, this is the question decided yesterday by the Court of Appeal in Jenks v. DLA Piper Rudnick Gray Cary US LLP, Cal. Ct. of Appeal Case No. A143990 (Dec. 16, 2015). The Court’s holding that a nonsignatory party can enforce the arbitration provision is less surprising under the facts of the case.

The plaintiff, M. Todd Jenks, was hired by Gray Cary Ware & Friedenrich (Gray Cary). His offer letter included an arbitration clause. Gray Cary subsequently merged into DLA Piper. Thereafter, DLA Piper and Mr. Jenks signed a termination agreement that made no mention of arbitration. Over two years later, Mr. Jenks sued DLA Piper, alleging four causes of action. DLA succeeded in persuading the trial court to order arbitration. Although the arbitrator returned an award for Mr. Jenks, he decided to appeal the trial court’s entry of judgment in conformity with the arbitration award.

The Court of Appeal, in an opinion by Justice Robert L. Dondero, found that DLA Piper had standing to enforce the arbitration agreement in the offer letter even though it was not a party based on Marenco v. DirecTV, 233 Cal. App. 4th 1409 (2015). The Court, citing California Corporations Code § 16914 and Maryland law, also found that DLA Piper succeeded by operation of law to Gray Cary’s contract rights. Next, the Court found that Gray Cary’s offer letter had not been modified and was not superseded by DLA Piper’s termination letter, notwithstanding an integration clause in the termination letter. In this case, integration was expressly limited to the “subject matter hereof”, i.e., the terms of Mr. Jenks’ resignation.

While the Court of Appeal’s opinion makes interesting reading, it does raise one significant question. Why did the Court bother to write it at all? At the outset, the Court held that Mr. Jenks had forfeited his argument that DLA Piper as a nonsignatory could not enforce the arbitration agreement. When a team forfeits a game, they don’t go ahead and play the game. It’s simply game over. In this case, the Court’s analysis, however illuminating, would appear to be just dicta.

January 27, 2016

Webcast: “Best Efforts Offerings – Nuts & Bolts”

Tune in tomorrow for the webcast – “Best Efforts Offerings: Nuts & Bolts” – to hear from Hunton & Williams’ Greg Cope, Arnall Golden Gregory’s Bob Dow and Pillsbury’s Bob Robbins to learn the nuances of Rule 10b-9 and “best efforts” offerings. Here’s our “Best Efforts Offerings Handbook“…

January 26, 2016

HSR’s Revised Jurisdictional Thresholds

As noted in these memos, the thresholds set forth in the HSR Act have been revised ― as they are annually―based on the change in gross national product. The minimum size of transaction has been raised from $76.3 million to $78.2 million – expected to apply to all transactions closing after the effective date, probably in the last week of February 2016.

January 25, 2016

Disclosure-Only Settlements: In re Trulia As Death Knell?

Last week, I blogged about a recent study that shows disclosure-only settlements dropping dramatically in the last quarter of 2015 as the Delaware judiciary delivered some hard-hitting decisions in that area. Now we have In re Trulia, CA 10020-CB (Del. Ch.; 1/22/16), in which Chancellor Bouchard refused to approve a disclosure-only settlement with a decision that possibly delivers a coup de grace to these types of settlements absent a showing that the additional disclosures are clearly material.

Chancellor Bouchard’s decision makes it clear that the Delaware Chancery Court will no longer approve settlements involving the release of broad claims in exchange for additional disclosures of dubious quality. These settlements have involved an exchange of near-meaningless changes to the “Background,” “Interests of Certain Persons in the Merger” and “Opinion of Financial Advisor” sections of a merger proxy or Schedule 14D-9 – and/or merely cosmetic changes to the buyer’s deal protections in a merger agreement – in return for a defendant’s agreement to support the plaintiff’s fee application.

So In re Trulia is a potential game-changer – as it comes on the heels Aeroflex, Riverbed, TW Telecom, etc. – as it may further diminish the leverage that strike suit firms have been able to wield for years. It appears to be the most potent condemnation of marginally-pled claims – and it should refocus deal litigation on those relatively rare circumstances where there is demonstrable evidence of disloyalty, bad faith and disqualifying conflicts of interest.

Notably, Chancellor Bouchard recommends the adoption – on a clear day – of exclusive forum bylaws to the extent the decision fuels an increase in deal litigation outside of Delaware. And he calls on the courts of “sister states” to appreciate the judicial waste inherent in litigation designed only to line the pockets of plaintiff firms while providing no real value to shareholders. Thanks to Greenberg Traurig’s Cliff Neimeth for his insights!

Also see this blog by Steve Quinlivan – and we’re posting memos in our “Disclosure” Practice Area