The plaintiffs’ alleged that after being barred by the Georgia Lottery Commission, the company’s founder and its COO secretly siphoned assets and contracts from the company and caused it to repurchase them at inflated values. They further alleged that after acquiring control, the new owner joined the scheme by leveraging these inflated financials to raise debt and fund over $400 million in distributions to insiders, ultimately saddling the company with unsustainable debt that led to its bankruptcy.
The defendants responded to the plaintiffs’ fraudulent transfer claims by contending that the company’s lenders ratified the challenged transfers, and that the plaintiffs failed to state a claim because they did not plead fraud with particularity. This excerpt from Debevoise’s memo on the case explains the court’s refusal to dismiss the plaintiff’s fraudulent transfer claims:
The Court declined to dismiss the actual fraudulent transfer claims, demonstrating the relative ease with which such claims might survive a motion to dismiss even in the face of what may be strong defenses to those claims on the merits: ratification and the failure to state a claim.
Ratification posits that a lender’s authorization, or “ratification,” of a transfer estops the lender, or those suing on its behalf, from later challenging the transfer. The Plaintiffs rebutted this theory by alleging that material facts were withheld from the lenders at the time of authorization. The Court agreed, holding that dismissal would require a fuller examination of the totality of the facts and circumstances of what the lenders knew at the time they authorized the transfer.
The Court also rejected the Defendants’ second argument, that the complaint failed to state a claim. As the Court noted, “[b]ecause debtors rarely admit fraudulent intent, courts must usually infer it” through circumstantial evidence. Such circumstantial evidence is typically pleaded through “badges of fraud, i.e., circumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent.” Although at least some Defendants argued that Federal Rules of Civil Procedure Rule 9(b)’s (“Rule 9(b)”) heightened pleading standard for fraud claims should apply, the Court did not take up this line of argument or even mention Rule 9(b) in its opinion, instead appearing to adopt Federal Rules of Civil Procedure Rule 8’s more lenient pleading standards.
The Court declined to dismiss the claim based on the presence of two badges of fraud: (1) the transfers occurred while the debtors were insolvent; and (2) the transfers involved a substantial portion of the debtors’ assets. Together, these were sufficient to survive a motion to dismiss.
The memo says that the decision suggests that some courts might not require plaintiffs to satisfy the higher pleading standard that generally applies to fraud claims in federal court when addressing fraudulent transfer claims at the motion to dismiss stage. However, it also points out that while these claims may be relatively easy to plead in courts that take this approach, proving an actual fraudulent transfer has proven to be much more difficult.
We’ve previously blogged about FTC Chair Andrew Ferguson’s promise that the agency would “get the hell out of the way” of non-problematic merger transactions, and the latest edition of Dechert’s Antitrust Merger Investigation Timing Tracker suggests that he’s a man of his word:
The average duration of significant U.S. merger investigations concluded in Q1 2026 is 10.8 months, coming in below the 12.3 month record-high average in 2025. The year-to-date median investigation duration is 11.8 months, compared with a median of 11.6 in 2025. For deals announced in 2025 and reviewed entirely under Trump-led agencies, the average investigation duration is 10.2 months, indicating some movement toward a shortening in average duration under the current administration.
This shorter timeline may reflect an effort to recalibrate the pace of merger investigations, consistent with broader policy signals from agency leadership favoring a more streamlined approach to merger review – or, as FTC Chair Andrew Ferguson put it, a desire to “get out of the way” of unproblematic deals. Earlier this month, the FTC also reaffirmed in its that it will vigorously mission statement enforce the antitrust laws “without unduly burdening legitimate business activity,” a phrase that had been removed from the Biden FTC’s strategic plan.
Dechert’s report also points to the recent judicial decision vacating the FTC’s new HSR form and the reinstatement of the prior, more abbreviated form. While the agency also reinstated the early termination process, the report notes that early terminations account for a much smaller percentage of transactions than they did prior to the time the process was suspended.
– While global campaign activity was down 11% year-over-year (62 campaigns vs. 70 in Q1 2025), activism in the U.S. remained elevated and drove the lion’s share of the activity in the quarter, as Europe and APAC – particularly Japan –lagged.
– Technology and Industrials remained the most targeted sectors, accounting for 49% of campaigns (above the four-year average of 43%); Financial Institutions experienced a notable uplift in activity (15% vs. 8%) while campaigns in the Healthcare sector cooled (10% vs. 12%).
– While M&A-related campaigns in January and February tracked near their respective four-year averages, activity tempered in March, moderating the Q1 total to 29%, up year-over-year, but below the four-year average of 43%.
– 45 Board seats won in Q1 were down 12% vs. an elevated Q1 2025, but in line with the four-year average. In Q1, Biglari’s unsuccessful “withhold” campaign at Jack in the Box represents the only major proxy fight that went to a vote; there are currently eight upcoming major proxy fights and “withhold” campaigns for 25 Board seats (Americold, CarMax, First Trust, Lululemon, Pacira, Whitestone REIT, WEX and Ruger).
– Nine CEOs have resigned within one year of an activist campaign being initiated, at a similar level to the elevated four-year YTD average of 10 (Acadia Healthcare, Barrick, Charles River, Fortune Brands, Kyocera, SIG Group, STAAR Surgical and Workday).
Gallagher recently published an article tracking how the way buyers and sellers divide responsibility for Rep & Warranty Insurance premiums and retentions has evolved over the years. This excerpt summarizes how market practice with regard to premiums has changed since 2018:
If we step back to 2018-2019, RWI premium allocation was far more varied. Sellers often paid for the policy, or parties split the cost in what many practitioners saw as a “fairness-based” approach. But as the data clearly shows, that world is largely behind us.
By 2021, split premium structures had all but disappeared, and the market settled decisively into a new norm: Buyers cover the premium. Obviously, this trend aligns with a market that’s favorable to sellers. Since 2021, the market has evolved from seller-favorable to mixed, and premium payment is now highly dependent on the strength of the target.
Even today, sellers still pay occasionally — about 17% of the time as of 2025 — but the directional trend is unmistakable.
The article cites three reasons for the shift in payment responsibility over time – declining premiums, competitive deal dynamics, and sellers’ desire for a “clean exit.”
The article also points out that allocation of the retention has evolved as well. Initially, sellers were expected to have some “skin in the game,” and were frequently required to bear some or all of the loss until the retention was met. That’s much less common today, as pricing differences between “zero indemnity” deals and deals that contemplate partial seller indemnity have diminished, sellers have insisted on a true “walkaway,” and insurers have become more comfortable with low seller indemnity structures so long as they’re accompanied by quality disclosures.
Yesterday, the Delaware Supreme Court issued its decision in Wagner v. BRP Group (Del. Sup.; 5/26). As John previously shared, the facts and challenges involved in the case were strikingly similar to those of Moelis, as was Vice Chancellor Laster’s decision at the Chancery Court level. As the Supreme Court points out, its Moelis decision dismissing the claims on procedural grounds was released after briefing on appeal concluded in this case, at which point the Court requested supplemental briefing on the impact of Moelis.
While the plaintiff conceded that her facial challenges to the stockholders’ agreement were barred after Moelis, she claimed that she had as-applied challenges that should continue. The Delaware Supreme Court disagreed, pointing out that the complaint doesn’t allege that any of the challenged consent rights were ever exercised, and reversed the Chancery Court’s decision for the reasons cited in Moelis (that the challenged provisions are voidable, not void, and subject to equitable defenses, including a laches defense that plaintiff unreasonably delayed asserting her claim).
As we noted in March, the recently ended 76-day partial government shutdown delayed some dealmaking, even though the Treasury and all CFIUS agencies (except DHS) were funded throughout. Now that the President signed DHS funding legislation, CFIUS is resuming normal operations, but some delays may continue. This Freshfields blog shares these key takeaways on the current state of CFIUS review:
– CFIUS clocks are no longer being tolled, and it will begin accepting new filings.
– CFIUS continued substantive analysis of already-accepted filings during the shutdown but did not accept any new filings, creating a significant backlog that will affect review timelines going forward.
– CFIUS has been confirming the new statutory deadlines applicable to matters that were already on the clock at the time of the shutdown.
– It will likely take several months for the post-shutdown backlog to clear and for CFIUS to return to pre-shutdown levels of predictability for initiating reviews.
– The backlog increases the likelihood that, until Fall, new filings will take longer to be accepted, notices will be pushed into the investigation phase, and declarations will be resolved with a no-action letter or a request for a long-form notice.
On Friday, in Guerra v. Snap (Del. Ch.; 5/26), the Delaware Court of Chancery addressed a motion to dismiss fraudulent inducement claims related to SNAP’s 2021 acquisition of Popwallet brought by the former CEO and co-founder acting as representative of Popwallet’s former stockholders. The statements underlying the fraudulent inducement claims were premised on public statements and SEC filings made by SNAP.
For his equitable fraud claim, Guerra alleges “Snap publicly made numerous material misrepresentations and omissions meant to induce Popwallet and its former stockholders to enter into the Merger Agreement with a purchase price that Snap would pay in inflated stock.” Guerra also alleges “Popwallet, its board of directors, and Elias Guerra as the Securityholder Representative justifiably relied on Snap’s public statements and SEC filings in negotiating and agreeing to the Merger Agreement’s terms because Snap had an independent duty to provide accurate information to stockholders and the SEC.” [. . .] Guerra’s common-law fraud claim makes essentially the same allegations as the equitable fraud claim.
SNAP pointed to SLUSA, or the Securities Litigation Uniform Standards Act of 1998, which preempts certain state-law-based securities fraud class actions involving “covered securities” under the Private Securities Litigation Reform Act of 1995, with limited exceptions. Before SLUSA’s enactment, plaintiffs had used state-law-based class actions to avoid the heightened pleading requirements and other procedural impediments imposed on federal securities class actions by the PSLRA. Under SLUSA, federal claims are generally the only ones permitted to be made for class actions involving securities traded on a national securities exchange, and federal court is the only forum in which those claims may be brought.
SLUSA preemption requires that:
– The action is a “covered class action;”
– The claims asserted in the state court complaint are state-law claims;
– The action involves a “covered security”;
– The complaint alleges “either (a) a misrepresentation or omission of a material fact or (b) the use of any manipulative or deceptive device or contrivance;” and
– The misrepresentations or omissions were made in connection with the sale or purchase of “covered securities.”
The Chancery Court found that:
Each element of SLUSA preemption is present: this action is a covered class action based on state law that involves a covered security and alleges misrepresentations or omissions of a material fact in connection with the purchase or sale of a covered security. Under SLUSA, this action is preempted and must be dismissed.
In so doing, the court pointed out that the action was a covered class action since Popwallet’s former stockholders, not the former CEO or Popwallet, are “persons” with common questions of fact and law, and the former CEO was acting on their behalf. It rejected the plaintiff’s argument that the action did not involve a “covered security” because Popwallet stockholders received restricted shares of SNAP that weren’t immediately transferable. Finally, it said, “a misrepresentation is ‘in connection with the purchase or sale of a covered security’ if it is ‘material to the decision by one or more individuals (other than the fraudster) to purchase or sell a covered security.’ [. . .] This includes stock acquired through a merger.”
This Debevoise article (page 7) says we can’t think of tariffs as a temporary disruption anymore. They need to be treated as a “recurring operating and transactional risk requiring sustained focus in diligence, valuation, transaction structuring, contractual risk allocation, and post-closing integration.” After suggesting ways to preserve potential refunds, the alert suggests the following:
[A]cquirors and investors should account for tariff exposure directly in diligence and underwriting. That includes mapping and stress-testing supply chains, key customer and supplier contracts, and pricing flexibility, as well as assessing whether tariff risk is fully captured in the deal economics. That inquiry may affect the credibility of projections, the sustainability of recent earnings, the adequacy of carveout financials, and the appropriateness of valuation and contingent consideration. It may also shape how transaction risk is allocated, including through closing conditions, interim covenants, and targeted indemnity protection.
[T]ransaction parties should review existing agreements and negotiate new ones with tariff risk allocation in mind. Because tariffs can materially affect earnings stability, pricing flexibility, and supplier and customer relationships, provisions addressing price adjustments, pass-through rights, change-in-law protection, indemnities, termination rights, and dispute resolution may take on increased significance, as we reported here.
[C]ompanies should incorporate tariff compliance into integration and governance planning from the outset. Practical steps may include establishing a cross-functional tariff response team, implementing protocols for repricing and supplier renegotiation following defined tariff events, and strengthening customs classification, valuation and country-of-origin substantiation processes to reduce overpayment risk and preserve access to refunds, exclusions or other relief.
On Friday, in Meyers v. Zimmer Biomet Holdings (Del. Ch.; 5/26), the Chancery Court dismissed claims for breach of an earnout’s “commercially reasonable efforts” covenant and the implied covenant, but allowed a narrow fraud claim to survive. The lawsuit arose from Zimmer’s 2022 acquisition of Embody, Inc. for an initial cash payment of $155 million plus $120 million in possible earnout payments over a three-year period. Only $72.5 million of the earnout was paid.
The plaintiff securityholder representative claimed that Zimmer fraudulently induced Embody to enter into the merger agreement by representing its intentions to carry out Embody’s preexisting clinical development plans and by claiming that it “was hiring, and already had budget approval to hire, 94 direct sports medicine sales representatives over the next two years.” The merger agreement did not include anti-reliance language but did include a standard integration clause.
Citing precedent, the court said: “While anti-reliance language is needed to stand as a contractual bar to an extra-contractual fraud claim based on factual misrepresentations, an integration clause alone is sufficient to bar a fraud claim based on expressions of future intent or future promises” inconsistent with the written agreement. Accordingly, the court dismissed the fraud claim premised on Zimmer’s development plan statements but bifurcated the statement regarding hiring, finding that the representation that Zimmer “already had budget approval” was a statement of present fact and could support a fraud claim.
As to the earnout provision, the parties disagreed about whether the commercially reasonable efforts clause was qualified by language that Zimmer had the right to direct and control the production, marketing, promotion, sale and commercialization of the product in all respects, in their sole discretion, or, as the plaintiff argued, whether the “commercially reasonable” term qualified the “sole discretion.” The court found the plaintiff’s argument to be reasonable, but still dismissed the claim for breach. The agreement didn’t define commercially reasonable efforts, and whether applying an inward- or outward-facing standard, the court found the complaint fell short of alleging breach.
Plaintiff does not allege or even attempt to explain why the number and experience of sales representatives that New Embody did employ was commercially unreasonable by any standard. Additionally, Plaintiff alleges that New Embody failed to use commercially reasonable efforts because it did not follow Plaintiff’s plans as allegedly promised in the Development Representation, including by failing to improve the terms of employee incentive plans, decreasing the R&D budget compared to Embody’s budget, and “shelving” certain “improvements” that Embody had planned for Tapestry RC.
Other than alleging that New Embody failed to follow Embody’s existing plans, Plaintiff does not allege or explain why New Embody’s efforts were not commercially reasonable. The Amended Complaint makes no effort to “plead[] at least some facts tying [New Embody’s conduct] to the ‘relevant yardstick’ supplied by the contractual commercially reasonable efforts provision,” whatever Plaintiff believes that standard to be.
As to the implied covenant claims, the court found that there was no contractual gap for the implied covenant to fill.
MergerMarket recently issued its Q1 2026 M&A Highlights report. Among other things, the report said that global M&A volume rose 22% year-on-year to $1.16 trillion through March 23rd. That’s the second highest first quarter ever after 2021. However, not all the news was good. This excerpt notes that financial sponsors had a bumpy ride during the year’s first quarter:
Headwinds from geopolitical uncertainty, private credit market jitters and scrutiny on AI from investment committees created a more challenging environment for sponsors in 1Q.
Global financial sponsor investment activity declined 14% YoY to USD 143bn. AES’s proposed USD 38.4bn buyout by a Global Infrastructure Management/ EQT-led consortium in early March accounted for nearly a third of the total, underlined the growing interest in infrastructure and energy transition from sponsors.
Exit activity also slowed, dropping 29% YoY to USD 112.4bn. Top-tier assets continued to command strong premiums, while sale processes in more volatile sectors paused or failed to trade. The largest exit was Aethon Energy Management’s USD 7.5bn sale of Aethon United in January, while partial exits, and more creative dealmaking were a strong feature of the market.
The report says that North American M&A grew 32% year-over-year to $611.1 billion. North American deals accounted for 55% of global volume and the first quarter was second-strongest first quarter on record for the region. The EMEA region also posted strong results, with deal volume up 48% year-over-year to $334.7 billion. The Asia Pacific region was the laggard, with deal volume declining by 27% year-over-year to $165.2 billion. MergerMarket says the Asia Pacific region was heavily impacted by the Iran war and its reliance on oil imports.
In terms of industry sector performance, tech led all sectors with a record $357.5 billion in deal volume. OpenAI’s staggering $110 billion raise. Utility and energy followed with a record $ 132.5 billion. The financial services sector also had a strong quarter, with deal volume doubling year-over-year.