We have posted the transcript of our recent webcast: “Activist Profiles and Playbooks.” Great program, with lots of kudos from members…
Monthly Archives: February 2013
John Grossbauer of Potter Anderson notes: In Meso Scale Diagnostics v. Roche Diagnostics, Delaware Vice Chancellor Parsons granted summary judgment in favor of defendants on the question whether a reverse triangular merger could be an “assignment by operation of law” of a license agreement. The Court declined to follow the decision of the Northern District of California in SQL Solutions v. Oracle, which had reached the opposite conclusion.
The summary judgment opinion should provide comfort on the issue the Vice Chancellor had raised in his motion to dismiss opinion, in which he found it possible at that stage that an assignment could have occurred. The Vice Chancellor refused to grant summary judgment on the issue whether plaintiffs could enforce a license agreement to which they were not parties but to which they both consented and “joined in,” finding the contracts at issue ambiguous on this point.
One of my favorite blogs is Mark Suster’s “Both Sides of the Table,” even though Mark is a venture capitalist and that’s not really my thing. One of his most interesting blogs is entitled “How to Work with Lawyers at a Startup.” Check it out. It could give lawyers ideas about how they should market themselves…
Recently, the SEC settled insider trading charges against a guy, who allegedly learned of Texas Instruments’ pending acquisition of National Semiconductor from his wife, a partner at a law firm working on the deal. Lesson learned.
According to PwC’s 16th Annual CEO Survey released recently, US CEOs are more intent on M&A in 2013 than their global peers, and they’re concentrating on consolidation and expansion in the US market. Among the key US M&A findings of the survey:
– Forty percent of US CEOs consider M&A/joint ventures/strategic alliances to be a top investment priority; and 42% of US CEOs say they’re planning to complete a domestic deal this year (30% completed a domestic deal in 2012)
– Aside from North America, US CEOs’ target regions for M&A/joint venture/strategic alliances include Western Europe (43%), Latin America (28%), and East Asia (26%)
– Divestitures are a critical piece of the US deals market, representing around a third of deal volume in 2012 – and PwC expects them to retain a prominent strategic position in 2013 for US CEOs
– Joint ventures and alliances are also on US CEOs’ agenda with nearly 60% planning a new alliance/JV in 2013
– Some industry specific shifts may drive activity including healthcare reforms that are likely to spur consolidation, and financial services companies pursuing divestitures to bolster capital levels and unlock asset values. The technology and oil & gas sectors also present opportunities for M&A activity in 2013
Tune in tomorrow for the webcast – “Projections, Prospects & Other Crystal Ball Provisions: Colliding with 20/20 Hindsight” – to hear Wilson Chu and Peter Flocos of K&L Gates and Sal Fira of Grant Thornton discuss how a seller’s innocent optimism may become buyer’s basis for fraud and rescission.
Here’s a note from Harvard Professor Lucian Bebchuk:
My latest New York Times DealBook column focuses on an important but overlooked aspect of the debate on whether the SEC should tighten the disclosure requirements of activist blockholders. The column, Don’t Make Poison Pills More Deadly, develops an argument that I made in a Conference Board debate with Martin Lipton.
The column explains that the considered reform may facilitate the adoption of low-threshold poison pills that cap ownership at low levels. Even if the SEC were to decide that tightening disclosure requirements is desirable, it should limit the application of tightened requirements to companies whose charters do not permit the use of low-threshold poison pills. The SEC, I argue, should ensure it does not take any action that would harm investors by facilitating the pernicious use of low-threshold poison pills.
Recently, as noted in this memo, the FTC proposed changed to its premerger notification rules related to the withdrawal of HSR filings. The proposed rules seek to formalize the existing procedures whereby an acquiring person may voluntarily withdraw a pending HSR filing and resubmit within two business days without paying an additional HSR filing fee – and to establish a “bright line” trigger for the automatic withdrawal of an HSR filing that is tied to the SEC’s disclosure requirements. In other words, it would establish a procedure for the automatic withdrawal of an HSR filing when a SEC filing is made announcing that a transaction has been terminated. While the former merely seeks to formalize existing procedures, the latter is an entirely new mechanism that may have negative repercussions for certain filing parties.
Here’s a memo from Wachtell Lipton:
The Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research recently released their analysis of securities class action filings in 2012. They report that 152 new securities class actions were filed last year, a 19 percent decline from the 188 new filings in 2011.
Of particular interest is the observation that only thirteen cases arising from merger and acquisition transactions were filed in federal courts in 2012, as compared to 43 in 2011 and 40 in 2010. “Evidence indicates,” the report states, that merger and acquisition litigation is “now being pursued almost exclusively in state courts after the unusual jump in federal M&A filings in 2010 and 2011.” Though such litigation typically arises under state law, plaintiffs often have the option to frame their claims as violations of the federal securities laws or bring them in federal court by invoking diversity jurisdiction.
The report does not attempt to explain these developments, but our experience suggests several reasons why the plaintiffs’ bar may have come to prefer to pursue certain securities claims in state courts. The reasons include the heightened pleading requirements and the automatic discovery stay pending a motion to dismiss imposed by the Private Securities Litigation Reform Act, and the perception that federal courts impose a more rigorous settlement approval process and are less generous in awarding attorneys’ fees.
In addition, a series of U.S. Supreme Court decisions has sharply limited the availability of the federal securities laws (and, therefore, the federal courts) to private plaintiffs seeking to assert claims against defendants who allegedly aided and abetted the alleged fraud or did not themselves make any false or misleading statements. Moreover, in cases arising out of merger and acquisition transactions, some federal courts are seen by plaintiffs’ lawyers as more likely than non-Delaware state courts to adhere to Delaware precedent deferring to a target board’s business judgment.
The option to choose the forum in which to bring litigation can be significant in shareholder litigation generally. The Supreme Court recently granted certiorari to determine whether investors in CDs issued by an affiliate of R. Allen Stanford can bring their “Ponzi scheme” class action claims in state court. In a decision at odds with holdings in other Circuits, the Fifth Circuit held that such claims were not precluded by the Securities Litigation Uniform Standards Act. Roland v. Green, 675 F.3d 503 (5th Cir. 2012), cert. granted, Jan. 18, 2013. Roland is not a merger case, but, like the movement of merger litigation away from federal courts, it illustrates how federal procedural rules and statutory law may channel securities litigation into state courts. The case will be closely watched by potential defendants who may find themselves facing state-court class claims that could not proceed in a federal court.