DealLawyers.com Blog

Wachtell Lipton recently published the 2022 edition of its Going Private Guide. The 85-page guide is full of insights into all aspects of the going private process.  For example, here’s an excerpt addressing why a tender offer might be preferrable to a one-step merger when it comes to managing dissident stockholders attempting to play games with a deal:

Another potential advantage of the tender offer structure is its relative favorability in most circumstances in dealing with dissident stockholder attempts to “hold up” friendly merger transactions. The tender offer structure may be advantageous in overcoming hold-up obstacles because:

– Tender offers do not suffer from the so-called “dead-vote” problem that arises in contested merger transactions when the holders of a substantial number of shares sell after the record date and then either do not vote or change an outdated vote.

–  ISS and other proxy advisory services only occasionally make recommendations or other commentary with respect to tender offers because there is no specific voting or proxy decision, making it more likely for stockholders to tender based on their economic interests rather than to vote based on ISS’s views (which may reflect non-price factors).

–  Recent experience indicates that dissident stockholders may be less likely to try to “game” a tender offer than a merger vote, and therefore, the risk of a “no” vote (i.e., a less-than-50% tender) may be lower than for a traditional voted-upon merger.

Topics addressed in the guide include preliminary planning issues, transaction structures, state corporate law standards, federal disclosure requirements, dealing with competing offers, partnering with other investors & financing the transaction.

– John Jenkins