December 5, 2023
Managing Conflicts: Lessons from Recent Litigation
While every conflict is different, this Skadden alert discusses examples of what to do — and what not to do — when persons involved in a deal process have conflicts. The examples of behavior viewed favorably or unfavorably are based on four recent Delaware decisions involving deal processes challenged by stockholders due to conflicts.
This example highlights how the independence — and also the experience — of the financial advisor to the board or special committee can influence the court’s perception of the deal process:
– The courts in the Tesla, Oracle and Columbia Pipeline cases praised the boards or special committees for selecting top-tier financial advisors without longstanding relationships or conflicts with their companies or counterparties.
– In the Tesla case, the court positively noted that, during due diligence, the company’s banker investigated the seller’s financial state, had discussions with the seller’s financial advisor, adjusted the focus of its work as concerns arose, reran analyses as needed, and kept the board apprised of new developments. The court also noted that, in response to information discovered during due diligence, the board lowered the offer price.
– In the Mindbody decision, the court applauded the company’s banker for sharing its knowledge about the buyer, including its modus operandi and associated risks, but said that the company’s CEO ignored that information.
– Meredith Ervine