September 19, 2018

Appraisal: Delaware’s All About the Process

This Morrison & Foerster memo reviews the Delaware Chancery Court’s recent decisions in In re Appraisal of Solera Holdings, (Del. Ch.; 7/18) & BlueBlade Capital Opportunities v. Norcraft Companies, (Del. Ch.; 7/18) and highlights the importance of process-related factors in Delaware’s current approach to appraisal valuation. Here’s an excerpt:

Following Dell and DFC, a court finding that a deal process provides reliable indications of value is likely to give great (even dispositive) weight to the deal price. Both the Solera court and the Norcraft court acknowledged the weight given to deal price in the Delaware Supreme Court’s recent appraisal decisions and began their analyses with a review of the sales process to determine whether the sales process justified such reliance on the deal price.

Of course, the significance of such a review raises questions for a buyer, since it is hard for a buyer to know in advance exactly what kind of deal process a target company has run (though a buyer may have some indications during the process, such as the approaches made to Fortune by the conflicted executive in Norcraft).

The memo also discusses potential limitations of relying on a “go-shop” as a market check tool, and the importance of documenting synergies in order to reduce valuations. It also notes the continuing possibility of an Aruba Networks valuation at the pre-announcement trading price.

John Jenkins