Sidley recently analyzed all late-stage director contests at Russell 3000 companies in the last eight years — which includes five years pre-UPC and three years post — to understand the impact of the SEC’s universal proxy rule on contested elections. As these excerpts from their report show, the assumption that UPC would make it easier for activists to win seats didn’t exactly come to fruition as expected. The impact has been more nuanced.
The “floor” on activists’ electoral success has risen. At least one activist nominee was elected in 48% of UPC elections, up from 39%. Half of these successes have been limited to a single seat, an increase from 10% to 24% of total elections.
The “ceiling” on activist success has collapsed. Shareholders have supported at least half of the dissident slate in only 24% of UPC elections, down from 39%.
The average number of activist candidates elected under the UPC is down 22% (1.1 to 0.9 seats), and the average when a dissident wins at least one seat is down 37% (from 2.9 to 1.8 seats).
Management success has ticked down while remaining typical. “Clean sweeps” (full-slate elections) by management continue to be a majority of contested elections under the UPC (52%, down from 61%).
Activists are more often withdrawing their slates after ISS and Glass Lewis back management (13% of late-stage proxy contests under the UPC withdrew after proxy advisor recommendations, up from 9%)
Activists are more often withdrawing their slates after ISS and Glass Lewis back management (13% of late-stage proxy contests under the UPC withdrew after proxy advisor recommendations, up from 9%)
Activist clean sweeps have effectively vanished, falling from 29% of pre-UPC contested elections to none aside from the proxy contests at Masimo.
The memo says the “net effect” of these data points is that “activist victories have increased in frequency but compressed toward single-seat outcomes.” This memo and others analyzing UPC are posted in our “Proxy Fights” Practice Area.
An article in the NYU Law Review links greater antitrust enforcement to a decrease not just in M&A but also IPOs. It says “startups have responded to the antitrust crackdown not by choosing a different exit but by choosing no exit.” A summary in the HLS blog describes this link and the alternatives that “startups” are pursuing.
Between 2012 and 2019, enforcers challenged only three startup acquisitions.
It says this had a “chilling effect” that “spread across Silicon Valley, putting would-be acquirers, founders, and VCs on notice that acquisitions by large incumbents were risky.” But this didn’t push more startups to pursue IPOs.
[W]hile IPOs and acquisitions both provide liquidity, they are not perfect substitutes. The price that a startup commands in an acquisition may exceed the valuation it can achieve in an IPO because of synergies, economies of scale and scope, or the premium incumbents are willing to pay to eliminate potential competitors. The IPO market is also highly cyclical, so going public at the wrong time could be costly. And heightened antitrust scrutiny can reduce the value of an IPO by undermining one of its main advantages: access to publicly traded equity that can be used as currency for future acquisitions.
“Startups,” acquirers, founders and VCs have turned to other means to meet their goals.
In an employee tender offer, a startup lets its employees cash out some or all of their shares while the startup remains private. Secondary sales of startup shares used to be small deals, and they were typically limited to founders or other key employees. But now rank-and-file startup employees can sell their shares, and the secondary market for startup equity has multiplied in value.
Continuation funds let VCs stay invested in their portfolio companies longer than traditional venture funds allow. And as a result, startups face less liquidity pressure and can postpone exits.
Thwarted acquirers have also figured out strategies to evade merger enforcement. One of their strategies is a new structure that we call a centaur—a private company that is funded primarily by public company cash flows. The two largest centaurs are OpenAI and Anthropic, the companies behind ChatGPT and Claude. OpenAI has raised $13 billion from Microsoft, and Anthropic has raised $8 billion from Amazon and $3 billion from Google. Corporate VC investments by operating companies have been rising for the last two decades. But the centaur structure goes beyond traditional corporate VC by crowding out other investors and tying the fate of the startup and the public company with a deep commercial partnership. These deals allow Big Tech to access cutting-edge technology—and exercise influence over potential competitors—without an acquisition.
Another strategy is the reverse acquihire. In this kind of deal, a large tech company persuades the founders and key employees of a startup to quit en masse. Then it hires the former employees and makes a payment to the shell of the startup they left behind, which is ostensibly a fee to license the startup’s tech but is really a means to pay off its VCs. A reverse acquihire is an acquisition in substance but not form. And it’s becoming popular—Microsoft, Amazon, Alphabet, and Meta have all used it.
In Sohovich v. Avalara, (9th Cir.; 3/25) the 9th Circuit reversed a district court decision and allowed a plaintiff to move forward with allegations that disclosures in a target’s merger proxy concerning ISS’s favorable recommendation of the transaction violated Rule 14a-9. Here’s an excerpt from a Goodwin newsletter article on the decision:
In an unpublished, non-precedential decision, the Ninth Circuit largely affirmed the lower court’s dismissal, agreeing that many of Avalara’s statements leading up to the purchase were inactionable puffery and neither objectively false nor misleading. But the Ninth Circuit disagreed with the District Court’s holding that the plaintiff failed to “adequately plead the objective falsity or misleading nature” of certain of Avalara’s statements and reversed the dismissal of the plaintiff’s claims that were predicated upon theories that the company (a) misled the public by claiming that a report from a proxy advisory firm recommended the sale, while omitting various warnings about the sale in the same report, and (b) omitted inorganic growth from its projections in the proxy statement.
First, the Ninth Circuit noted that, crediting the plaintiff’s allegations as true, it was plausible that Avalara might have downplayed concerns about the acquisition that the proxy advisory firm, Institutional Shareholder Services (ISS), expressed in its report. The Ninth Circuit noted that the fact that “some of the [ISS] report’s unfavorable excerpts” were made public in an SEC filing by a third-party did not relieve Avalara’s obligation not to make false or misleading statements about the report. And, although it was true that the report recommended the sale, reducing it to simple approval could still be misleading without the context provided by the doubts also included in the report.
The memo says that the case is a reminder that efforts to gloss over or ignore negative aspects of third-party statements excerpted in proxy materials can be construed as involving material omissions, and that companies should be cautious when excerpting those materials and consider whether their selective excerpts might be construed as misrepresenting the third party’s overall message.
Deal delays due to extended antitrust merger reviews were a hallmark of the Biden administration’s skeptical – and sometimes outright hostile – approach to M&A. According to this recent McDermott Will newsletter, that’s changing, and the agencies are emphasizing the importance of getting out of the way of deals that don’t raise significant issues:
Consistent with the current, more business-friendly attitudes of the FTC and DOJ toward dealmaking, the two agencies also are making efforts to allow nonproblematic mergers to proceed more quickly. The FTC has brought back the practice of granting early termination of the Hart-Scott-Rodino (HSR) waiting period, a practice the FTC suspended under the Biden administration. FTC Commissioner Holyoak has stated that requests for early termination will help reduce the workload of FTC staff and help parties close transactions more quickly.
Since restarting the early termination program, the FTC has granted more than 100 early termination requests. Assistant Attorney General (Antitrust Division) Gail Slater has stated that the DOJ has been looking for other ways to speed up the merger review process, as well. FTC Chair Ferguson said that the FTC “must get out of the way quickly” when a merger would not violate antitrust laws, to avoid bogging down innovation and interfering with the free market. These statements stand in contrast with the approach of Biden administration enforcers, which was to try to slow down dealmaking generally.
Aumni and Fenwick recently released their latest “Venture Beacon,” a periodic report on the state of the venture capital market. This one covers the first half of 2025, and this excerpt highlights some of the survey’s key findings:
– Data through the first half of 2025 reinforces early-stage resilience amid late-stage decline. Seed through Series C rounds demonstrated strong performance in Q2 2025, with deal sizes growing 5 to 22% and valuations rising 3 to 60% quarter-over-quarter, while Series D+ rounds experienced sharp declines of 8.9% in capital raised and 48% in pre-money valuations, reflecting reduced mega-round activity at later stages.
– Seed rounds are evolving structurally, likely to bridge extended fundraising timelines. Seed deals continued to outperform later-stage financings in H1 2025, with companies raising larger Seed rounds. The data suggests traditional stage definitions are evolving as Seed rounds increasingly adopt characteristics historically associated with Series A financings. Further, the Seed to Series A graduation pipeline improved significantly, with 21% of Q2 2023 Seed raises in Aumni data successfully going on to raise a Series A within the following two years, from 12% the prior quarter.
– AI premiums persist despite shifting market share. Artificial Intelligence companies maintained strong valuation premiums across multiple sectors at Series A, though AI representation across funding stages has plateaued or declined in H1 2025. AI companies in the aggregate have taken a lower share of total funding allocation in the first half of 2025 compared to 2024, with the exception of Series D+ rounds.
– Secondary markets stabilized with improving sentiment. While secondary transaction volume remains at pre-pandemic levels, 28.9% of H1 2025 secondaries traded at premiums to recent equity rounds. The average secondary tranche size remains subdued at $1.2M to $1.4M, indicating that while sentiment has improved, it remains tempered by continued investor caution.
– Founder-friendly terms continue to accelerate in H1 2025. Founder preferred stock incidence accelerated to 11% in H1 2025, measured by inclusion as a stock provision tracked in equity financing closing set documents, from 9% in 2024 and 6% in 2023.
Earlier this year, we blogged about the DOJ’s lawsuit against KKR alleging serial violations of the HSR Act. Last week, the DOJ announced the formation of a “Comply with Care” Task Force aimed at HSR and other compliance issues involving antitrust investigations. Here’s an excerpt from Troutman Pepper Locke’s memo on the announcement:
On August 29, 2025, during a speech at Ohio State University Law School, Assistant Attorney General Gail Slater announced the creation of a “Comply With Care” task force within the Antitrust Division of the Department of Justice (DOJ), which will focus on enforcement actions against parties flouting disclosure obligations. The speech and task force are a continuation of the Antitrust Division’s recent lawsuits against companies for failing to make merger filings under the Hart-Scott-Rodino (HSR) Act or responding properly to investigations.
AAG Slater stated the DOJ’s commitment to counter those who “undermine sound antitrust enforcement for everyone,” specifically claiming that “a few actors—many of them at Big Law firms” have used “[t]actics designed to circumvent legal process and hinder our investigations.”
The speech highlighted alleged violations of the HSR Act, which are subject to a fine of up to $53,088 per day. The targeted practices include failing to make HSR filings and failing to submit relevant documents.
AAG Slater also criticized other practices that she considered objectionable, including corporate defendants failing to preserve evidence, delay tactics, overuse of the attorney-client privilege, deficient privilege logs, and failure to preserve documents, including ephemeral messages.
PE firms sometimes pursue multiple, simultaneous divestitures of businesses in order to quickly unlock the value of their assets. This recent Alvarez & Marsal “white paper” addresses the challenges associated with pursuing multiple carve-outs and offers guidance on how to meet the organizational and operational challenges they present. This excerpt discusses how to achieve efficient execution of multiple divestitures:
Execution efficiency starts with the strategic sequencing of activities and strong project management. We recommend mapping out the critical path for each carve-out and looking for opportunities to reduce conflict in the tasks; for example, sequencing the timing of major IT cutovers or finance carve-out steps so they don’t all peak at the same moment.
Staggering certain closings or milestone dates may be necessary if the same team (or external advisor) is responsible for deliverables across deals. By sequencing and pacing the work, you reduce the chance of overload that could compromise Day 1 readiness on any single transaction. It’s also prudent to build contingencies into the plan.
We also focus on identifying the “known unknowns” – areas likely to be unpredictable, such as length of time to negotiate certain third-party consents or to receive regulatory clearance – and develop fall-back plans. For instance, in critical supplier contracts, we expect to agree upfront with counterparties that if a consent or split is not achieved by close, an interim arrangement (i.e. an inform-only change provision rather than requiring renegotiation) will allow operations to continue. This flexibility can prevent one delayed negotiation from stalling the entire deal.
Other topics covered in the white paper include the kind of governance and organizational structure necessary to manage the divestiture process, resource planning and prioritization, defining the scope of the businesses included in each carve-out and managing the negotiation process, and employee engagement and change management.
Yesterday, the SEC posted this notice and request for comment for a proposed change to Nasdaq’s rules applicable to initial listings in connection with de-SPAC transactions involving OTC trading SPACs. The change would align the treatment of OTC trading SPACs with similarly situated exchange-listed SPACs.
– Nasdaq is proposing to modify the definition of a “Reverse Merger” in Listing Rule 5005(a)(39) to exclude the security of a special purpose acquisition company, as that term is defined in Item 1601(b) of Regulation S-K (“SPAC”) that is listing in connection with a de-SPAC transaction, as that term is defined in Item 1601(a) of Regulation S-K (“de-SPAC transaction”), upon effectiveness of a 1933 Securities Act registration statement (“Registration Statement”).
A company formed by reverse merger is eligible for initial listing only if it satisfies additional initial listing conditions, including that, immediately before the filing of the application, the combined entity traded for at least one year in the U.S. over-the-counter market, on another national securities exchange, or on a regulated foreign exchange and timely filed all required periodic financial reports, including at least one annual report. A company formed by the acquisition of an operating company by a “listed” SPAC is currently excluded from the definition of reverse merger — and these additional initial listing requirements.
Nasdaq points to the new disclosure requirements applicable to de-SPAC transactions. With those changes, Nasdaq believes a company listing on Nasdaq in connection with a de-SPAC transaction at the time of effectiveness of its registration statement should be excluded from the additional reverse merger requirements.
Nasdaq also proposes to exempt listing applications in connection with business combinations involving an OTC-trading SPAC from the ADV requirement that applies to securities that traded in the OTC market prior to the application.
– Nasdaq also proposes to modify Listing Rules 5315(e)(4), 5405(a)(4), and 5505(a)(5) (the “ADV Requirement”) to exclude the security of a company listing in connection with a de-SPAC transaction, upon effectiveness of a Registration Statement, from the minimum trading volume requirement applicable to newly listing companies that previously traded in the over-the-counter (“OTC”) market.
All the words for uncertainty and inconsistency apply when discussing non-compete laws in 2025. On the federal level, the FTC’s rule prohibiting most non-competes remains blocked on a nationwide basis, still making its way through the courts. But, since that injunction just over a year ago, there’s been a lot of movement at the state level. This Morgan Lewis alert describes the “growing divergence” in how states regulate non-competes.
Some states, such as Minnesota, Oklahoma, and North Dakota, have joined California in effectively banning noncompetes, subject to limited exceptions.
Many states have adopted statutes that cap noncompete temporal durations. Colorado has taken a unique approach, setting a formula to calculate the permissive duration of noncompetes for individual minority owners in the sale-of-business context: the maximum duration of a noncompete is determined by the consideration the individual received from the sale divided by the average annual cash compensation received by the individual from the business (including income received on account of their ownership interest) during the prior two years or the period the individual was affiliated with the business if shorter.
California recently adopted anti-noncompete legislation that purports to extend with a broad reach across jurisdictions if there is some connection to California. Recent cases in non-California jurisdictions have severely limited this “long-arm” aspect of the law, finding it not enforceable in respect of agreements entered into outside of California. It remains to be seen how a California court might rule in a similar case brought inside of the state.
Other states, including Kansas and Florida, have gone the opposite direction, adopting legislation making it easier to enforce noncompetes. Florida’s new CHOICE Act, for example, expands the permissible duration of noncompetes to up to four years and requires that a court issue a preliminary injunction simply upon motion by a covered employer seeking enforcement of a covered agreement.
There have also been a number of important developments beyond federal rulemaking and state legislation surrounding sale- and equity-based noncompetes, some of which we’ve already bloggedabout. Here are some from the alert:
– Auction NDAs now regularly include nonsolicits of employees, and we have observed that the market practice in this area has been to increase the reach and duration of these restrictive covenants. Private equity professionals should note that these agreements have antitrust law implications; a potential buyer signing up to such a restrictive covenant could be exposing itself to liability.
– The Delaware Supreme Court has recently weighed in on forfeiture-for-competition provisions, finding that these provisions, which do not enjoin competition but rather require forfeiture of certain enumerated benefits (whether compensation or equity), are enforceable if they satisfy standard contract law principles and are not subject to the more rigorous “reasonableness” test that applies to traditional noncompetes.
– On the other hand, the Delaware Court of Chancery recently questioned, in striking down a noncompete, the adequacy of consideration to support a noncompete in certain equity-based noncompete contexts, albeit many practitioners would consider this a departure from historical and expected interpretations of the law (and so it is unclear as to whether this decision will be followed in future cases). In another case, the Delaware chancery court declined to reform and enforce what it deemed to be an overly broad noncompete.
Check out our “Antitrust” Practice Area for more. Lots more, in fact! Our section on State Non-Compete Legislation is lengthy and growing.
Multiple tax regimes and financial standards. Added regulatory hurdles. Legal differences ranging from IP to comp and benefits. Not to mention various time zones and possibly languages. Cross-border deals are not for the faint of heart. Having an understanding of transactional differences and what’s customary in other jurisdictions can help avoid headaches, misunderstandings, and ultimately mean getting to closing more quickly amidst all this complexity. To that end, this recent Sheppard Mullin blog explores material differences in legal frameworks and market practices for transactions in the US v. UK so, if you’re new to UK deals, you can better navigate transactions and work with your UK counterparts.
For example, US transactions commonly employ a purchase price adjustment to ensure the financial condition of the target matches agreed-upon metrics at closing. In the UK, you’re more likely to see a “locked-box” approach where the purchase price is fixed based on accounts drawn up to the pre-signing/exchange “locked-box” date with provisions against leakage (value extraction). The blog says this difference reflects broader cultural and legal distinctions:
The US approach emphasizes flexibility and accuracy through post-closing adjustments, allowing for dynamic financial realities at closing. However, this flexibility can lead to disputes and extended negotiations.
Conversely, the UK locked-box mechanism prioritizes certainty and simplicity, offering a fixed price that reduces the need for post-closing negotiations. This method aligns with the UK’s preference for predictability and reduced legal complexity, albeit requiring greater upfront diligence and assurance.
Another significant difference is the approach to sandbagging. US agreements may include a pro-sandbagging clause — allowing a party to recover for breaches of reps and warranties even if it had prior knowledge — or remain silent on the topic — in which case recovery may also be possible depending on the governing state law — with anti-sandbagging provisions being often sought by sellers, but less often included in the final agreement. Across the pond, English law tends to favor “anti-sandbagging” clauses.
English case law supports this position, suggesting that a buyer who knows of a breach is considered not to have relied on the warranty’s accuracy, or to have no or minimal damages, as they are assumed to have assessed the value of the shares or assets knowing the warranty was false. Anti-sandbagging clauses typically restrict the attribution of knowledge to the buyer’s core deal team, excluding knowledge held by external advisors.
MAC or MAE closing conditions allowing the buyer to terminate if a material adverse change or effect occurs, a staple in the US, are also less likely in UK agreements, so that a deal will close absent a failure to receive regulatory clearance, other express condition or a fundamental breach — also giving more deal certainty to sellers.
The blog also addresses differences in due diligence processes/disclosures, equity incentives, third-party reliance on diligence reports and auction processes. This Winston & Strawn article also discusses RWI, restrictive covenants and tax. For even more, check out our “Cross-Border” Practice Area.