You’ve undoubtedly heard a lot about the deal struck by Intel and the Department of Commerce, but last week on TheCorporateCounsel.net, Liz shared some of the corporate governance and activism implications of this development and the possibility for more deals of its kind:
With the President hyping it up on social media that the government’s acquisition of Intel stock will not be the last we see of its equity stake in Corporate America (see this Reuters article and this WSJ article about remarks from Kevin Hassett, the National Economic Council director), all eyes are on the first few companies who are striking deals. Yesterday, Intel filed this Form 8-K to disclose details of its agreement with the Department of Commerce – through which the US Government is becoming the company’s largest stockholder, with a 9.9% interest.
In addition to providing a description of the transaction, which I’m sure many folks are reading with interest, the 8-K updates the Company’s previously disclosed risk factors to reflect the deal’s conditions and impact. Here are a few that jumped out from the Item 8.01 disclosure:
•The transactions are dilutive to existing stockholders. The issuance of shares of common stock to the US Government at a discount to the current market price is dilutive to existing stockholders, and stockholders may suffer significant additional dilution if the conditions to the Warrant are triggered and the Warrant are exercised.
•The US Government’s equity position in the Company reduces the voting and other governance rights of stockholders and may limit potential future transactions that may be beneficial to stockholders. The transactions contemplated by the Purchase Agreement may result in the US Government becoming the Company’s largest stockholder. The US Government’s interests in the Company may not be the same as those of other stockholders. The Purchase Agreement requires the US Government to vote its shares of common stock as recommended by the Company’s board of directors, subject to applicable law and exceptions to protect the US Government’s interests. This will reduce the voting influence of other stockholders with respect to the selection of directors of the Company and proposals voted on by stockholders. The existence of a significant US Government equity interest in the Company, the voting of such shares either as directed by the Company’s board of directors or the US Government, and the US Government’s substantial additional powers with respect to the laws and regulations impacting the Company, may substantially limit the Company’s ability to pursue potential future strategic transactions that may be beneficial to stockholders, including by potentially limiting the willingness of other third parties to engage in such potential strategic transactions with the Company.
•The Company’s non-US business may be adversely impacted by the US Government being a significant stockholder. Sales outside the US accounted for 76% of the Company’s revenue for the fiscal year ended December 28, 2024. Having the US Government as a significant stockholder of the Company could subject the Company to additional regulations, obligations or restrictions, such as foreign subsidy laws or otherwise, in other countries.
As this NYT article notes, the government isn’t acting like a traditional hedge fund activist in the arrangements it has struck to-date – and the typical playbook doesn’t apply. One wrinkle is considering how director duties play out. This 2017 article discusses director duties in the context of the government ownership interests that resulted from TARP.
Public communications & disclosure may also need extra thought. Outside of its SEC filings, Intel is of course praising the deal, and its stock rose the day the deal was announced. While it’s not a novel concept to be enthused about a deal while also having to warn investors of the downsides, it’s less common to include quotes from other companies in the press release. And companies may need to take into account not only the threat of securities litigation from traditional stockholders, but also the pros & cons of this new flavor of “government backing” – and how their comments (or lack of comments) might impact the company’s ranking on the loyalty list.
A recent Farrell Fritz blog flags a new decision from New York’s Second Department holding that the broad “exclusive remedy” language in New York’s appraisal statute precluded a shareholder from bringing a claim for damages based upon share ownership, even if that claim related to another shareholder’s misappropriation of proceeds from the transaction. Here’s an excerpt from the blog:
The conventional path to a fair value appraisal proceeding under Section 623 of the Business Corporation Law (the “BCL”) involves deliberate invocation of the statute by the business entity, the dissenting owner, or both.
For corporation mergers and asset sales, the process ordinarily involves the entity’s transmission of written notice to shareholders of their right to dissent from the transaction and pursue an appraisal remedy (BCL § 605 [a]; BCL § 623 [l]), the shareholder’s written exercise of the right to dissent (BCL § 623 [a], [c]), the entity’s offer to purchase the dissenting shareholder’s interest for fair value (BCL § 623 [g]), a statutory negotiating period (BCL § 623 [h]), and, if the entity and shareholder cannot reach agreement on price, commencement by one side, or the other, of an appraisal proceeding (BCL § 623 [h], [1], [2]).
If, after all of that activity, neither side files an appraisal proceeding within the statutory timeframe, then “all dissenter’s rights shall be lost unless the supreme court, for good cause shown, shall otherwise direct” (BCL § 623 [h] [2]).
Under BCL § 623 (k), the “exclusive remedy” provision of the fair value appraisal statute, “[t]he enforcement by a shareholder of his right to receive payment for his shares in the manner provided herein shall exclude the enforcement by such shareholder of any other right to which he might otherwise be entitled by virtue of share ownership,” except an action for “equitable relief” to enjoin, set aside, or rescind “unlawful or fraudulent corporate conduct” (Breed v Barton, 54 NY2d 82 [1981]).
Can a shareholder lose all rights as shareholder under BCL § 623 (k) where neither the corporation, nor shareholders, did anything to invoke the fair value appraisal statute, and where all parties consent to the transaction?
Can that loss of rights include a shareholder’s ability to challenge a co-shareholder’s post-closing withholding of the proceeds from the very transaction that gave rise to potential dissenters’ rights?
The blog takes a deep dive into the trial court and appellate court decisions in the case and also highlights seemingly conflicting case law. It says that the key takeaway from Klein is that where a corporate transaction potentially triggers appraisal rights under New York law, the failure to exercise those rights “can lead to severe consequences, even for unknown, future events post-dating the closing, like misappropriation of the cash consideration from the very transaction itself creating dissenters’ rights.”
Here’s something that Liz blogged on TheCorporateCounsel.net yesterday:
I was a little surprised to read in this recent NYT DealBook newsletter that of the 59 companies that went public in the U.S. last quarter, 41 of them were SPACs – according to data from S&P Global. I blogged last month that the SPAC/de-SPAC route has been useful for digital asset treasury companies, but these stats show there may be room in the tent for other types of companies as well. This Dealmaker newsletter from The Information (sign-up required) points to cloud providers and defense tech firms as potential de-SPAC candidates.
Meanwhile, this SPAC Insider article says that part of the reason for the SPAC resurgence is the “SPAC-truism” that they tend to thrive when the general IPO market is also improving. Additionally, it attributes this year’s first-half stats to the view that SPACs offer an attractive middle-of-the-road approach for small and mid-cap companies. Here’s more detail:
While SPACs have enjoyed two strong quarters of IPO issuance, Traditional IPOs have lagged that momentum. However, not for long. May and June saw eToro, Circle, and Chime IPO use the traditional route to great success. Interestingly, two of those deals, eToro and Circle, were previously SPAC combination companies. However, the previous administration severely curtailed any crypto-related deals leading to both of these combinations becoming terminated SPACs.
Nonetheless, going the traditional IPO route was the shot in the arm the IPO market needed. As a result, the window is opening only for large, well established companies. On the other hand, the Traditional IPO has also become the provenance of micro and nano-cap companies, which continue to see strong numbers opt for this route as well. For the small and mid-cap companies sandwiched in between these two IPO sizes, perhaps the SPAC route provides a viable option.
However, it should be noted that tariff announcements starting in April significantly curtailed all traditional IPO activity. As a result, SPACs are currently accounting for a larger share of the overall IPO market than we’ve seen in recent quarters. In fact, in Q1-2025, SPACs accounted for 26% of all IPOs, whether that was via Traditional or SPAC route. As of the end of Q2-2025, that percentage is now 39%. However, it is anticipated there should be increased traditional IPO activity in Q3 and the percentage comprised by SPACs should come down to a more normalized level.
It seems like every day there is either a boom or bust predicted for IPOs, so we will stay tuned on how this all shakes out. While I’m not advocating for one path or another here, part of any securities lawyer’s “IPO readiness toolkit” should be understanding the different options and how they might be a fit for different clients and different market conditions. Meredith had shared potential benefits of SPACs a few months ago. And we’ve shared variousthoughts over the past year about being ready to hit the ground running!
In our latest Deal Lawyers Download Podcast, Honigman’s Matthew VanWasshnova joined Meredith to discuss the implications of the ongoing changes in US tariff policy for M&A transactions. Topics covered in this 28-minute podcast include:
– Why significant tariff uncertainty remains and is on the minds of M&A practitioners
– The tariff-related risks deal teams have been navigating in 2025, including pricing risk, deal risk and timing pressure, regulatory and enforcement risk and the greater potential for post-closing disputes that comes with uncertainty and complexity
– How buyers are front-loading trade diligence and carefully scrutinizing supply chains, mapping both supply- and demand-side risks, and why it’s crucial to involve commercial transactions attorneys in this process
– How buyers have attempted to tailor representations to address certain trade risks, while maintaining the breadth of representations and warranties that have been adopted as market
– Tips for buyers seeking RWI policies, which generally exclude tariff-related risks
– Common earnout structures and the use of rollover equity or seller notes to allocate tariff risk
– How parties are seeking to manage risk between signing and closing (e.g., tariff-based closing conditions, walkaway rights if certain cost thresholds are hit, some reversion to a financing out and interim covenants that address operations and the supply chain)
We’re always looking for new podcast content, so if you have something you’d like to talk about, please reach out to me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com. We’re wide open when it comes to topics – an interesting new judicial decision, other legal or market developments, best practices, war stories, tips on handling deal issues, interesting side gigs, or anything else you think might be of interest to the members of our community are all fair game.
As I’ve mentioned before, cases dealing with disclosure schedules are like catnip to me, and those schedules featured prominently in the Chancery Court’s recent decision in SAM 1 Aggregator v. Mars Holdco, (Del. Ch.; 8/25). In that case, Chancellor McCormick cited the seller’s disclosure letter delivered in connection with the parties’ stock purchase agreement in rejecting the buyer’s post-closing fraud and aiding and abetting allegations.
The stock purchase agreement included a provision disclaiming any representations and warranties not contained in Section 2.2 of the agreement and an explicit reliance disclaimer from buyer with respect to any reps & warranties not contained in the agreement. The agreement also provided that the buyer could only bring claims for breaches of the reps & warranties “based on an actual and intentional fraud with respect to any statement in any representation or warranty made by [the seller].”
After the closing, the buyer discovered what it contended were undisclosed internal controls issues and undisclosed liabilities at the target relating to the migration of its credit card services business to Amazon Web Services (AWS). It filed a lawsuit asserting a fraud claim against the seller and aiding and abetting claims against the seller’s controlling stockholder based on alleged breaches of “Accounting Process Representations” with respect to the adequacy of its internal controls and a “Liabilities Representation” concerning the absence of undisclosed liabilities contained in Section 2.2 of the stock purchase agreement.
The buyer’s fraud allegations relating to the Accounting Process Representations centered on information contained in demand letter sent by counsel for the target’s former CAO Peter Owino. The demand letter claimed that the former CAO had been instructed to improperly capitalize certain expenses in violation of GAAP and that his employment had been terminated in retaliation for raising these concerns. The buyer also alleged that the seller committed fraud by falsely representing that it had no undisclosed liabilities despite its knowledge of commitments associated with the AWS migration.
In rejecting these allegations, Chancellor McCormick cited the reliance disclaimer and language limiting contractual fraud claims to those “based on actual and intentional fraud” with respect to statements in the reps & warranties. She then noted that the buyer’s claims based on the Accounting Process Representation had a fatal flaw:
The problem with Buyer’s theory is that the parties expressly qualified the Accounting Process Representations by the allegations in the Owino Letter. Section 2.2(f)(iii) states that, “[s]ince January 1, 2019, except as set forth in Section 2.2(f)(iii) of the Disclosure Letter, [Seller] has not” identified deficiencies covered by the Accounting Process Representations. Section 2.2(f)(iii) of the Disclosure Letter identifies the “Peter Owino Matter” as an express limitation on the representations in Section 2.2(f)(iii) of the Purchase Agreement. And the Disclosure Letter defines “Peter Owino Matter” as the “allegations against [Seller].”
The buyer tried to work around this problem by contending that the disclosure of the Peter Owino Matter should be construed to apply to employment issues only, and that the seller didn’t adequately disclose the demand letter’s “allegations of pervasive accounting improprieties.” The Chancellor dismissed this argument by asking “why would Seller expressly qualify its Accounting Process Representations with reference to something that was solely an employment matter?”
Chancellor McCormick also noted that the “Peter Owino Matter” was referenced a total of five times in the stock purchase agreement, further undercutting the buyer’s fraud allegations. With respect to the claims surrounding the AWS migration, she concluded that the estimated costs associated the future AWS migration weren’t “liabilities” as of the closing, and dismissed that claim as well.
In a private target market that seems to have been picked clean by VCs and PE firms, this a recent white paper by Lateral Investment Management says that founder-led “bootstrap” companies represent the “last untapped opportunity” for PE funds Here’s an excerpt from the intro:
Founder-led companies have been the foundation of the U.S. economy since the Industrial Revolution. Founders have built and led enduring businesses through profitable growth and, often, decades of evolution and development.
Before there was an institutional private equity market, founder-led bootstrapped businesses funded by personal savings were the norm in the U.S. From Andrew Carnegie (U.S. Steel) and Henry Ford (Ford Motor) to Larry Ellison (Oracle), founder-led businesses have a rich tradition of success in the U.S.–and for good reasons. More recently, software behemoths Atlassian and SAP never took outside investors and strong-willed founders Elon Musk (Tesla, SpaceX) and Mark Zuckerberg (Meta) have built distinctively founder-led companies despite taking institutional money.
Successful founder-led businesses are hardy organizations that have developed robust corporate cultures and loyal customers. They have a sense of mission and corporate identity. They are innovative and scrappy. They have survived through growing pains, business cycles, shared challenges, and setbacks. They are built on the sweat of their founders who have reinvested profits in growth from hard-won customers rather than going through rounds of VC funding.
The white paper says that founder-led companies represent a huge untapped market for PE, and that most can be found in the $9 trillion U.S. middle market sector. According to the white paper, there are 95K lower middle market bootstrapped companies, including 34K in the technology or technology-enabled service sub-sectors, and represent a high-value opportunity “hidden in plain site.” The white paper says that middle market founder-led companies have historically realized higher returns and lower loss rates than other entities and points out that lower middle market targets have entry valuation multiples that are 40-70% less than other targets.
The July-August issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– Long Live the Term Sheet — When Term Sheet Provisions Survive the Execution of Definitive Agreements
– Termination Fees: Breaking Up Usually Comes with a Price
– M&A Due Diligence: What You Miss Can Cost You
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
This HLS Blog from Diligent says there was an uptick in success rates for U.S.-based activists in 2025, with stronger director candidates and new tactics contributing to the outcomes. Here are some notable stats and takeaways from the blog:
– Of the 112 board seats won in the U.S. in the first half of the year, 92% were negotiated agreements (the highest proportion won through settlement in the last five years).
– Time to settlement was also down — averaging 16.5 days in the second quarter of 2025 compared to 26 days in the second quarter of 2024.
– One of the surprise developments of the season saw activists revise their playbook to hold directors to account with less costly withhold or “vote-no” campaigns.
– The first half saw activists that typically seek settlements persevere to bring high-conviction campaigns all the way to shareholders for decision.
– Common demands related to governance, personnel removal, changes in capital structure and executive compensation.
– M&A demands were flat year-over-year due to uncertainties, while moves to oppose transactions increased by over 60%.
The second set of 2025 DGCL amendments, reflected in Senate Bill 95, which was signed by the governor on June 30 and mostly became effective on August 1, has been understandably overshadowed by their slightly older sibling. But there are a few important things to know. Kyle Pinder of Morris Nichols recently penned a client alert that pulls all the 2025 amendments together in one helpful summary.
The second round of amendments primarily did the following: (i) clarified the types of claims that may be covered by certificate of incorporation- or bylaw-based forum selection provisions, and (ii) extended the prohibition on certificate of incorporation- or bylaw-based fee-shifting provisions to cover this clarified universe of claims.
On forum selection clauses, the amendments tackle the issue of whether a provision requiring all derivative claims to be brought exclusively in Chancery could be enforced to prevent stockholders from bringing derivative claims under the Exchange Act (for which the federal courts have exclusive jurisdiction). The Seventh and Ninth Circuits had come to contrary conclusions.
Amended Section 115 adopts the result reached by the Seventh Circuit and permits forum selection provisions addressing non-internal corporate claims that “relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors or officers,” so long as they permit stockholders to bring such claims in at least one court in Delaware (e.g., to bring Exchange Act derivative claims in the District of Delaware).
With respect to fee shifting, the DGCL already prohibited org doc provisions from shifting liability for fees and expenses incurred in connection with internal corporate claims to a stockholder. Amended DGCL Sections 102(f) and 109(b) extend that moratorium to prohibit provisions shifting to a stockholder the corporation’s fees and expenses incurred in connection with “any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the corporation, has brought . . . .”
The amendments tackle a handful of miscellaneous items, too, that are neatly addressed on the last page of the alert.
I’m happy to say that Kyle will be speaking on this topic during the “Delaware Hot Topics: Navigating Case Law & Statutory Developments” panel with fellow panelists Hunton’s Steve Haas, Barnes & Thornburg’s Jay Knight and Faegre Drinker’s Oderah Nwaeze at our Fall “Proxy Disclosure & Executive Compensation” Conferences happening in Las Vegas and virtually on October 21-22. I’m so looking forward to hearing from them — there’s so much to talk about! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
A recent Fried Frank article (plus summary HLS blog) discusses Delaware Court of Chancery decisions – Roofers Local v. Fidelity National(Del. Ch.; 5/25) and Wei v. Levinson(“Zoox”) (6/25), which we’ve blogged about before – that highlight the unpredictability of outcomes where entire fairness is applied. Because both of these involved litigation pending prior to February 17, the recent DGCL amendments were not applicable, and neither case involved a transaction structured to comply with MFW.
In Roofers, the court dismissed the case at the pleading stage, holding that although the process may have been flawed, the price appeared to be fair.
In Zoox, by contrast, the court rejected dismissal of the case at the pleading stage, holding that the allegations that a majority of the board that approved the transaction was conflicted was itself sufficient to indicate that both the process and the price may have been unfair—even though the transaction at issue appeared to provide more value to the stockholders than any other transaction proposed to the board.
The alert says, context matters:
Roofers involved a transaction with a conflicted controller – but the transaction was approved by two concededly independent directors, and the process was apparently pristine other than for a question about fairness based on the timing of the parties’ announcement of the transaction. The independent special committee was fully authorized, functioned well, and was focused on ensuring that the transaction be on terms at least equivalent to “a public market deal.”
Zoox, involved a sale to a third-party buyer following a process with multiple bidders, none of whose proposals provided as much value to the common stockholders – but the transaction was approved by a majority-conflicted board. There was no “distance” between the Preferred Stock holders and the directors they had appointed; the officer-directors were promised material non-ratable personal financial benefits; and the officer-directors had spoken of “forc[ing]” the deal on the stockholders.
But here’s the key: Both transactions “could have met the requirements for safe harbor protection (if the Amendments had been applicable) based on approval by the special committees.” Here are practice points from the blog in light of these differing outcomes and the March DGCL Amendments:
– Consider structuring conflicted transactions to come within the new DGCL safe harbors. The requirements for availability of the safe harbors are far easier to satisfy than the MFW prerequisites for business judgment review, particularly as (other than for going-private transactions) only approval by an independent special committee (and not by the minority or disinterested stockholders) is required.
– Consider including at least two independent directors on the board—so that conflicted transactions can be structured to come within the new safe harbors. The board should establish a record, when making independence determinations, that it obtained all relevant information and carefully considered the issue. Preferred stockholders appointing directors should carefully consider the benefits and disadvantages of appointing directors who hold control or leadership positions with the preferred stockholder.
– Contextualize fairness of price.When entire fairness applies (i.e., when the new DGCL safe harbors and MFW are unavailable), it still may be possible to obtain pleading-stage dismissal of fiduciary claims challenging conflicted transactions—at least where, as in Roofers, the plaintiff fails sufficiently to allege unfairness of the price and there was a strong (even if somewhat flawed) process. Analysis of fairness of the price should include what the company received in exchange for what it gave, as well as a comparison of the terms to what would be market. Although fairness of the price may be the predominant consideration, fairness of the process always should be addressed as well, no matter how fair the price.
– Other process points:
A special committee should establish a record that it considered alternatives, and the reasons it rejected them.
A buyer, to protect against claims of aiding and abetting sell-side fiduciary breaches, should maintain a record of deal term concessions made during the negotiations.
A transaction generally should not be announced before the special committee has done any work.
Management and directors should avoid statements about a personal vision, mission or dream for the company—although the court’s view as to whether such statements indicate motivation based on “personal interests” will no doubt depend on the specific language used and the overall factual context.
Management and directors should understand that comments they make to a counterparty during a sale process, purportedly “off the record,” are likely to come to light in the event of litigation and could have serious negative consequences.