Drawing from the circumstances of the closely followed bidding war between Novo Nordisk and Pfizer to acquire Metsera, this White & Case article discusses how boards should assess competing proposals that are alike in amount and composition, but differ in structure, timing and probability of consummation due to regulatory risk. The alert summarizes the facts of the Metsera saga as follows:
In the fourth quarter of 2025, Novo Nordisk A/S (“Novo”) intervened as an interloper in the acquisition of Metsera, Inc. (“Metsera”), a clinical-stage developer of obesity and metabolic therapies that had entered into a merger agreement to be acquired by Pfizer Inc. (“Pfizer”). Novo offered a higher headline price than Pfizer, together with a structure designed to neutralize the greater antitrust risk its offer carried. The structure was less novel than it first appeared. Novo ultimately abandoned the proposal after the staff of the Federal Trade Commission (the “FTC”) signaled that it was inclined to recommend a challenge and Pfizer commenced actions in two courts seeking to block the transaction. Pfizer raised its offer in successive steps until it matched Novo’s final proposal in both amount and composition. Once the headline figures converged, Metsera’s board concluded that Novo’s structure carried unacceptable legal and regulatory risk relative to the deal certainty Pfizer offered.
Here are a few key takeaways from the memo:
– Antitrust risk is a substantive component of deal value, and where competing bids converge on headline price, it tends to become the decisive variable. Nor is the resulting valuation discount confined to antitrust: the same arithmetic applies to any approval on which closing depends, whether the relevant regulator supervises insurance, banking, communications or energy.
– Although the final Pfizer and Novo prices were identical, the bids were not equal in value. The Novo proposal was worth what it promised only if the upfront structure survived legal challenge and the back-end merger cleared antitrust review, and the antitrust objections put both in doubt. A board weighing that uncertainty could reasonably conclude that Pfizer’s nearly certain package was worth more after adjusting for risk.
– Novo’s non-voting preferred structure allowed roughly three-quarters of the proposed consideration (valuing a contingent value right, or CVR, at its maximum), and half of Metsera’s equity, to change hands before any antitrust review. The HSR rules, which disregard any transaction or device employed to avoid a filing obligation and test reportability against the substance of the transaction as a whole, undermined the certainty the structure was designed to offer. A filing obligation may therefore exist notwithstanding the structure’s form.
– The regulatory-likelihood prong of the contractual “superior proposal” standard calls for a genuine probabilistic assessment, and for care in the sequencing and framing of the board’s findings rather than a nominal acknowledgment that clearance is uncertain.
The memo provides a detailed illustration of that probabilistic assessment. It also has a thorough discussion about how Delaware courts might have analyzed the agreement with Novo, had Metsera gone in that direction, and shares some practical tips for navigating competing bids that are primarily distinguished by regulatory risk. There’s a lot here, and it’s a practical read that’s worth your time.
When I blogged about the Chancery Court decision in Dodiya v. Franklin, et al. (Del. Ch., 8/26) – the first decision analyzing whether a transaction process met the new Section 144 safe harbors – I focused on the finding that Section 203 does not require that a stockholder vote be “informed,” rather than Vice Chancellor Will’s analysis of Section 144. That was because VC Will described the facts “as an extreme scenario where a board acted with reckless indifference to its own safeguards against a known leak.” But despite some unusual facts that go beyond the “ordinary imperfections of a sale process,” there are still some important Section 144-related takeaways from the decision, as this Goodwin alert details.
The case arose from a take-private acquisition led by Sababa Holdings Free LLC (Sababa), an entity owned and managed by Martin Franklin. Martin Franklin’s son, Michael Franklin, had joined the Whole Earth board in August 2022 and became interim CEO [. . .] Michael Franklin secretly sent his father’s investment firm “a 54-page goodwill impairment test” report containing material nonpublic information [. . .] a draft Form 10-K, the status of credit agreement negotiations, and a draft earnings and guidance release. Sababa subsequently purchased millions of shares of Whole Earth stock and accumulated a 19.8% stake before proposing to acquire the company.
After Sababa submitted its initial proposal, the board recognized Michael Franklin’s conflict and asked him to “sign an undertaking” prohibiting him from participating in the sale process, accessing process-related confidential information, or sharing information with his father or Sababa affiliates. He refused and was placed on paid leave [. . .] “the full [b]oard [knew he] had previously provided non-public information to his father’s company.”
Michael Franklin remained a director after resigning as CEO. On October 24, 2023, he received materials from “meetings held during his suspension,” including “nonpublic financial results,” special committee materials, “and an update on the […] investigation into his own misconduct.” A week later, he attended a board meeting for updates on that investigation, company financial results, and the special committee’s consideration of Sababa’s proposal.
No mechanism was in place “to prevent or detect further” leaks. The proxy statement nevertheless told stockholders that Michael Franklin had not participated in process-related activities, meetings, or communications and had received no process information from Whole Earth.
Vice Chancellor found these facts to be problematic for Section 144(a)(1) and (a)(2).
The court explained that a majority vote by disinterested directors is “necessary” but “not sufficient” by itself for Section 144(a)(1)’s safe harbor. The statute also requires that the board or committee authorizes the transaction “in good faith and without gross negligence.” This requirement, however, includes not just the mere act of director voting but also “the collective conduct of the board or committee that authorized the transaction.” Specifically, this requirement applies to how the board “informed itself, deliberated, negotiated, and reached its decision.” The participation of an interested director “does not [automatically] defeat the safe harbor,” but it “may bear on whether” the authorizing body acted “in good faith and without gross negligence.”
Drawing on Delaware fiduciary law, the court explained that good faith and gross negligence are distinct conditions [. . .] Because Section 144(a)(1) uses the conjunctive “and,” both conditions must be satisfied for the safe harbor to apply. Thus, a board may be grossly negligent even if it believes it is serving the corporation, while a careful process may still be undertaken in bad faith if directors “consciously advanc[e] interests other than those of the corporation.”
The Section 144(a)(1) safe harbor was unavailable at the dismissal stage because the court found it was “reasonably conceivable that the board acted with reckless indifference ‘to the risk that confidential information would reach the buyer,’ thereby compromising ‘the integrity of the sale process.’ Section 144(a)(1)’s safe harbor was therefore unavailable at the dismissal stage.”
As to Section 144(a)(2):
The court separately held that Section 144(a)(2)’s stockholder-vote safe harbor was unavailable. Although the merger received overwhelming approval, the proxy’s assurance that Michael Franklin had been “walled off from the process” was inconsistent with the pleaded facts and incorporated board materials. Because a reasonable stockholder would consider his continued access important given the father-son conflict and the prior leak, the “vote was not informed for purposes of [the] motion to dismiss.”
Notably, failure to meet the safe harbor conditions did not mean that the board was liable for breach of fiduciary duty. Although it was reasonably conceivable that the board was grossly negligent, the company’s exculpation provision shielded them from liability for breaches of the duty of care. The court dismissed claims against all but two directors. Only plaintiff’s duty of loyalty claims against two directors — the former CEO who shared confidential information and a director who negotiated a secret $1.4 million consulting arrangement with the buyer — survived the motion to dismiss.
Designated directors have always been in a tough spot. Though their relationship to the appointing stockholder can vary – with some holding key leadership roles at the stockholder while others are independent – they are still serving on the board at the behest of that one stockholder. Yet they owe fiduciary duties to the corporation and all its stockholders “in the aggregate.” As we’ve seen from some recent Chancery Court decisions (like Guilbeau v. Footprint), the interests of one stockholder or class may not align with the interests of the collective, and the directors can be held liable for breaching their fiduciary duties if they act for the benefit of one or a subset of the stockholders to the others’ detriment. Stockholders can also find themselves in the litigation hot seat for aiding and abetting those breaches.
For example, in Zync, Inc. v. Porsche Investments Management(Del. Ch.; 8/26), the Chancery Court denied a motion to dismiss allegations of breaches of fiduciary duties by a designee and aiding and abetting by the appointing stockholder. The company alleged that the director refused to act without the investor’s approval and, in doing so, delayed and actually prevented the company from entering into necessary financing arrangements, causing the company to shut down its business. Vice Chancellor Laster found that the allegations were sufficient to sustain claims that the director pursued the stockholders’ objectives over the company’s and that the stockholder aided and abetted the director’s breaches, intentionally interfered with the company’s prospective economic advantage and breached the implied covenant of good faith and fair dealing. He was also not persuaded that the claims should be dismissed as exculpated because Delaware law does not allow eliminating liability for intentional and bad-faith acts.
In light of this and other recent Delaware rulings, this Mayer Brown alert shares guidance for both designated directors and stockholders on managing liability risks, taking into account amended Section 144 of the DGCL. They’re worth reading in full, but here are the key takeaways related to amended Section 144 for director designees and appointing stockholders:
What Designated Directors Need to Know. Conflicted Transactions: When the board considers a transaction involving the appointing stockholder, designated directors may be deemed to be conflicted and subject to claims for breach of the duty of loyalty. In such situations, designated directors should consider mitigating their risk in the following ways:
– Safe Harbors: Conflicted designated directors should seek to ensure the transaction is structured to qualify for a safe harbor under new DGCL §144. A director is deemed to be conflicted under §144 if the board is asked to approve a transaction between the corporation and an entity in which the director has a “financial interest” or is a director, stockholder, partner, manager, member, or officer. In such cases, the approving directors generally may obtain safe harbor protection if the transaction is (1) approved by the affirmative vote of a majority of the disinterested directors of the board or committee of the board, (2) approved by the informed, uncoerced, and affirmative vote of the majority of the disinterested stockholders or (3) fair to the corporation and its stockholders. Subject to certain exceptions, the safe harbor protection under §144 exempts the director from equitable relief and damages relating to the director’s involvement in giving rise to the transaction, the director’s receipt of any benefit, the director’s participation in meetings regarding the transaction and the director’s involvement in the initiation, negotiation, and approval of the transaction.
– Abstention: While the §144 safe harbor provides broad protection, a conflicted director should also consider abstaining from the decision-making process. Generally, an abstaining director cannot be liable for the wrongful approval of a conflicted transaction, unless the director was involved in negotiating the transaction or promoting its approval.
What Appointing Stockholders Need to Know. Designation Rights as Evidence of Control: A designation right may render a stockholder a “controlling stockholder” under §144. Among the circumstances specified in §144 that can cause a stockholder to be deemed a controlling stockholder is the possession of contractual or other rights to cause the election of director nominees who constitute either (1) a majority of the members of the board or (2) directors entitled to cast a majority in voting power of all directors on the board. If deemed to be a controlling stockholder, conflicted transactions with the appointing stockholder may be subject to entire fairness review, unless the safe harbor and exculpation protections offered under §144 apply.
Late last month, the FTC announced the approval of a consent order requiring, as a condition to Ascension Health’s acquisition of AmSurg, that Ascension divest seven AmSurg ambulatory surgery centers after the FTC alleged that the acquisition would limit competition for certain services in certain metro areas. This consent order comes after the FTC created a Healthcare Task Force in March, and this Cooley alert says it “demonstrates the agency’s continued scrutiny of vertical and horizontal healthcare consolidation at the local, service level – even where the overall transaction value and combined entity size might not otherwise trigger significant antitrust concern nationally.”
Cooley says the consent order also shines some light on how the FTC is applying its approach to healthcare enforcement in practice. The memo shares these key takeaways for dealmakers in the healthcare space:
– Local market power remains key antitrust risk. The FTC’s challenge focused on competition concerns in five specific metro areas and three outpatient surgery services, underscoring that even relatively small local overlaps can draw scrutiny regardless of overall deal size. Healthcare providers should continue to expect market-by-market and service-by-service antitrust review.
– FTC oversight can extend well beyond Hart-Scott-Rodino (HSR) requirements. Under the settlement, Ascension must provide 30 days’ notice before acquiring any outpatient surgery center in the affected markets for the next 10 years, including transactions below HSR thresholds. This highlights the FTC’s willingness to impose long-term monitoring obligations following healthcare enforcement actions.
– The FTC continues to actively pursue its enforcement agenda and prioritize healthcare enforcement. The Ascension/AmSurg divestitures, coupled with the FTC’s recent federal court victory blocking Henkel’s acquisition of Liquid Nails, demonstrate that the agency is following through on its enforcement priorities, not just announcing them.
Lewis Brisbois’s Francis Pileggi and Aimee Czachorowski recently authored a Bloomberg Law article highlighting some of the significant practical advantages that Delaware offers its corporations compared with its leading competitors. The article focuses on business filings, and while it notes that Texas has recently announced a “Texas Express” service for expedited filings, this excerpt explains that what The Lone Star State offers still doesn’t compare to Delaware’s expedited services:
While this announcement is an improvement for Texas entities, the Delaware Division of Corporations provides a superior level of speed, responsiveness, efficiency, and cost.
For example, it doesn’t appear that Texas offers the one-hour service that Delaware offers. In Delaware, one can confirm the formation of an entity or receive confirmation of a filing within a matter of hours. The Delaware Division of Corporations will process the request within the requested time (such as one hour) and a filer can request a confirmation email.
Delaware also offers more options for expedited filings, with the most expedited services offered by Delaware being unavailable in Texas. For the two services — same-day and next-day — which are also offered in Texas, Delaware still proves to be less expensive, and easier to actually file.
The Delaware Division of Corporations provides several options to allow entities to request expedited service both for corporate filings or for uniform commercial code filings for a fee in addition to the normal filing fee.
While Delaware offers one-hour service, which can be requested for $1,000, it appears that the same level of expedited service is unavailable in Texas. Delaware also provides two-hour service for an additional fee of $500; Texas doesn’t offer two-hour service. Texas also announced that it will charge an additional fee for same day-service and next-day service, which Delaware already provides.
While these “back office” issues don’t get much attention from the media or others engaged in the DExit debate, for transactional lawyers and the companies they represent, the Delaware Secretary of State’s office to provide expedited services for a wide array of filings is incredibly important, and states that are serious about getting into the game need to be able to offer filing services that are on a par with those offered by Delaware.
SRS/Acquiom recently published a snapshot of earnout trends for 2025 transactions. Here are some of the highlights:
– Earnout use continues to increase as valuation gaps persist and buyer behavior evolves. While historical norms have been closer to 15%, earnouts appear in 24% of 2025 deals (excluding life sciences), more than 75% of 2025 biotechnology/pharmaceutical transactions, and have increased in prevalence among other private-target M&A sectors, including technology, energy, and manufacturing.
– Historically, deals involving private equity buyers or technology targets have been less likely to include earnouts. In 2025, however, both categories saw modest increases. Earnout use in VC-backed exits has varied over time and generally remains at or above the rate for all non-life sciences deals. In recent years, VC-backed technology exits have included fewer earnouts, consistent with market demand for earlystage AI and blockchain companies.
– Lower middle-market deals with upfront payments of $50 million or less—especially those of $25 million or less—are more likely to include earnouts tied to a larger share of total transaction value. LMM deals see lower earnout achievement rates as well, with a median of 43 cents on the dollar for those LMM deals with any level of earnout achievement. Larger deals, with upfront payments exceeding $50 million and any level of success on the earnout, saw a materially higher 67 cents on the dollar paid.
SRS/Acquiom found that most earnouts achieve at least some level of success, with sellers typically receiving about 50 cents on the dollar in deals where earnouts are paid. However, that’s strongly influenced by deal size and target industry, and overall, sellers receive approximately one in five potential earnout dollars across all transactions with potential earnouts.
The Delaware Supreme Court’s opinions in Brookfield and Inovalon introduced uncertainty regarding the level of detail that should be included in future disclosures related to legal and financial advisers in M&A transactions. The Delaware Court of Chancery’s opinion in Berger provides welcome clarity by holding that financial adviser disclosures are sufficient where they identify the relevant relationships and fees and, if fees from concurrent representations are not readily quantifiable, their “rough scale.”
Berger’s holding with respect to the legal adviser disclosures also makes it clear that it is not enough to simply show that a particular relationship was not disclosed—a plaintiff must also allege facts supporting an inference that the relationship was material enough to compromise the adviser’s ability to provide unconflicted advice to its client.
The memo says that in order to satisfy the standard set forth in these cases, boards and their advisers should identify and evaluate adviser relationships early on in the process and obtain updated conflict disclosures as the deal moves forward. Those actions should be accompanied by efforts to ensure that proxy disclosures give stockholders appropriate context concerning adviser fees and relationships.
Delaware courts have proven to be very flexible when it comes to issues involving advance notice bylaws, but the Chancery Court’s recent post-trial decision in ATG Capital Opportunities Fund LP v. Lane, (Del. Ch.; 8/26), indicates that there’s a limit to that flexibility when it comes to reading requirements in to advance notice bylaws that aren’t expressly set forth in them.
The case arose out of an activist investor’s efforts to nominate a slate of director candidates to the board of Empery Digital, a digital asset company. The board rejected the activist’s slate, based on suspicions that the activist was coordinating with another investor who wanted to liquidate the company’s Bitcoin assets and the activist’s failure to disclose a “massive short position” in Bitcoin ETFs, which the board concluded created a misalignment between the interests of the activist and those of other investors.
The good news for the board was that evidence was produced at trial suggested that the board was on to something. The bad news for the board was that Vice Chancellor Will concluded that this “something” wasn’t required to be disclosed under the terms of the advance notice bylaw. The defendants argued that coordinated activity between the activist and the other investor constituted an “agreement, arrangement, or understanding” (AAU), and that in prior decisions, the Chancery Court had permitted companies to reject nominees for failing to disclose the existence of an AAU. The Vice Chancellor rejected that argument:
The defendants analogize these facts to precedent where the court held that an undisclosed agreement, arrangement, or understanding (“AAU”) provided contractual or equitable grounds to reject a nomination. Yet there is a significant difference between the bylaws in those cases and the Bylaws at issue here. In prior cases, the bylaws at issue explicitly required a nominating stockholder to disclose AAUs. Empery’s Bylaws do not.
Section 2.5 of Empery’s Bylaws, which governs “Notice of Nominations for Election to the Board,” lacks any provision requiring a nominating stockholder to disclose an AAU concerning Empery or the nomination. This omission is striking because Section 2.4 of the Bylaws, which governs notices of business proposals to be brought before a meeting, requires the disclosure of all agreements, arrangements, and understandings in connection with the proposal. Nor does Empery have a bylaw requiring the disclosure of a Section 13(d) group.
The defendants pointed to other language in the bylaw requiring disclosure of a “participant” in the solicitation. Citing federal case law interpreting the term participant under the federal proxy rules, Vice Chancellor Will observed that these decisions rejected attempts to classify individuals as “participants” unless they either financed the proxy contest or directly participated in the solicitation. Applying this precedent and common law interpretive principles, the Vice Chancellor concluded that the investor was not a participant in the activist’s proxy solicitation.
Vice Chancellor Will’s conclusion that the investor was not a participant in the solicitation proved fatal to another argument put forward by the defendants that the nominations could be rejected. The defendants pointed to a bylaw provision requiring disclosure of any information required to be disclosed in a proxy statement under Schedule 14A. While Item 5(b) of Schedule 14A requires disclosure of the participants in the solicitation, the Court’s conclusion that the investor wasn’t a participant precluded this argument.
The defendants attempted to “pivot” and contended that Rule 14a-9, which prohibits false and misleading statements or omissions in proxy materials required the activist to disclose this information in order to comply with Schedule 14A. Vice Chancellor Will rejected this argument, noting that the letter rejecting the activist’s nominees didn’t cite Rule 14a-9, and that it would not be permitted to subsequently raise that as abasis for rejection:
When a board rejects a nomination, it must give the nominating stockholder sufficient notice of the contractual basis for rejection. Having grounded its rejection in the asserted failure to disclose [the other investor] as a participant, the defendants cannot wait until trial to abandon that basis and advance a different theory of contractual noncompliance. Advance notice bylaws are not moving targets.
The board asserted an independent basis to reject the activist’s nominees based on its failure to disclose the Bitcoin ETF short position and the allegedly related plan to liquidate the company’s Bitcoin holdings. Vice Chancellor Will evaluated this argument under Unocal. She concluded that even assuming the board identified a cognizable threat to corporate policy, rejection of the activist’s nominees was not a reasonable and proportionate response:
Rejection was a disproportionate response to the perceived threat of [the activist’s] plans for Empery. The Board could have informed stockholders of the evidence concerning [the activist’s] and [the other investor’s] relationship, their apparent views concerning Empery’s Bitcoin strategy, and the risks the Board believed a change in control presented.
Those arguments could then have been tested through the electoral process. Nothing in the record suggests that permitting Empery’s stockholders to consider [the activist’s] slate would have prevented the Board from making its case to the electorate or from disclosing the information it regarded as material.
The Vice Chancellor ultimately concluded that the activist had complied with its obligations under the advance notice bylaw, and that its nominees could stand for election at the company’s annual meeting.