DealLawyers.com Blog

Last month, Meredith blogged about the Chancery Court’s recent decision in Berger v. Fox, (Del. Ch.; 7/26), which addressed, among other things, disclosure of M&A advisor conflicts. That decision followed two 2024 Delaware Supreme Court decisions, City of Dearborn Police & Fire v. Brookfield Asset Management, (Del.; 3/24), and City of Sarasota Firefighters Pension Fund v. Inovalon Holdings, (Del. Ch.; 4/24), addressing the same topic. A recent Richards Layton memo discusses these three decisions, and notes that Berger helps to resolve some of the uncertainties created by the prior decisions:

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.

– John Jenkins