July 11, 2017
Delaware: Evolving M&A Standards of Review
This book chapter by Vice Chancellor Laster addresses the remarkable evolution in Delaware’s M&A jurisprudence over the past three decades. Here’s the abstract:
In the decades since 1985, the Delaware Supreme Court’s attitudes towards recurring third-party M&A scenarios have evolved significantly. Four areas that stand out are (i) the level of comfort with management-led, single-bidder processes, (ii) the legitimacy of defensive measures that appear designed to deter the emergence of alternative bids, (iii) the relative priority of fiduciary duties and third-party contract rights, and (iv) deference to stockholder voting. Current doctrine is much more favorable towards sell-side boards and the contract rights of third-parties.
Although many factors have contributed, the two predominant reasons for these shifts are (i) the rise of sophisticated institutional investors who have the ability to influence the direction of the corporations in which they invest and determine the outcome of M&A events, and (ii) the system-wide failure of stockholder-led M&A litigation to generate meaningful benefits for investors, setting aside occasional recoveries by a small subset of the bar.
After 30 years of evolution, are we close to a point of stasis in Delaware? In light of the rapid changes that have happened since Corwin & MFW were decided, it’s hard to say – my guess is that Delaware’s world is going to keep on spinning for a while.
– John Jenkins