This Freshfields blog discusses what the partial federal government shutdown, which began in mid-February, means for dealmakers. It says that the Treasury and all CFIUS agencies (except DHS) remain funded, but the shutdown still has an impact on deals, and that impact varies more, deal-by-deal, than other shutdowns.
Similar to previous government shutdowns, CFIUS statutory deadlines are currently tolled, but the impact of this shutdown is more limited and varies between transactions, depending, for example, on the stage at the time of the shutdown. The Committee is providing feedback on draft filings, requesting information from transaction parties, negotiating mitigation agreements, and approving transactions.
However, transactions where DHS has leading equities will likely experience longer delays, and CFIUS generally is not formally initiating the review of transactions that were not already on the clock, potentially resulting in a significant backlog as the shutdown drags on. Therefore, while Treasury is trying to move cases forward and minimize the negative impacts to transactions caused by the shutdown, parties need to be prepared for extended timelines.
The blog suggests:
– Determine the longstop date for your transaction. Because CFIUS’s deadlines are tolled, CFIUS approval could be significantly delayed. Transaction parties should assess whether the longstop date should be extended or consider the risks of closing the transaction prior to receiving CFIUS approval. – Assess the potential impact of the partial shutdown on your transaction. If there are any connections between the transaction and DHS such as, for example, contracts with DHS, the current partial shutdown may have a substantial effect on CFIUS’s ability to clear the transaction. – Promptly submit filings. CFIUS is still actively reviewing cases, and all regulatory requirements imposed on parties remain in effect during a lapse in appropriations. Not waiting to file your transaction can help ensure that it is not at the back of the line once the shutdown ends should there be a significant backlog and CFIUS may begin evaluating the transaction even if it has not initiated the review period. – Communicate with CFIUS on changes or updates to the transaction. Parties should generally keep the Committee informed of their transaction and key transaction deadlines. Additionally, promptly responding to CFIUS’s questions helps mitigate the risk of longer delays.
In January, VC Zurn denied a Comerica stockholder’s motion for a temporary restraining order enjoining the closing of the stock-for-stock merger with Fifth Third Bancorp. Later that month, she issued a letter opinion explaining the reasoning in advance of the merger closing. In HoldCo Opportunities Fund V v. Arthur G. Angulo et al. (Del. Ch.; 1/26), the stockholder alleged, among other things, that Comerica’s fiduciaries agreed to unenforceable deal protection provisions that were invalid under DGCL Section 141(a).
HoldCo contends the force-the-vote provision, the no-shop and fiduciary out, the mandatory renegotiation provision, the one-year outside date, and the 4.7% termination fee locked Comerica into the Fifth Third deal for a year without the right to terminate it for a better deal. HoldCo sought to enjoin closing the Merger—but not the stockholder vote—until Defendants redrafted the Merger Agreement to relax its deal protection provisions [. . .] HoldCo asserts the deal protections are illegal under [DGCL Section] 141(a) and Omnicare, as per se invalid constraints on the Comerica board’s authority, and unreasonable under Unocal, in that they forced upon stockholders a deal that entrenched Comerica fiduciaries in Fifth Third roles.
You already know VC Zurn didn’t find these arguments persuasive.
Boards are required to bargain for effective fiduciary out clauses permitting them to discharge their managerial authority in fidelity to stockholders, [but . . .] a fiduciary out need not be coupled with a termination right, or be free of a break fee, to give the board the necessary freedom to exercise its fiduciary duties [. . .] The one-year outside date does not strip the board of its managerial authority to decide if the Merger is best for stockholders: it defines how long the board must work to close the highly regulated Merger once stockholders approve it.
In her blog post on this letter opinion, Law Prof Ann Lipton asks whether the DGCL 141(a) challenge to these deal protections survives after the adoption of Section 122(18). Put another way, she asks “Does 122(18) apply to deal protections?” She points out the many references to Moelis in the briefings and notes, “Certainly, an acquirer is a ‘prospective stockholder,’ so doesn’t that mean the board has at least the authority to tie its own hands in a merger agreement?”
In its alert about the “market practice” DGCL amendments, Fried Frank referred to merger agreements when discussing the effectiveness of Section 122(18). VC Laster has written about the potential implications of Section 122(18) in the context of a merger (but focusing on the extent to which a contract can require a board to recommend a merger under Section 251).
We’ve recently posted another episode of our “Understanding Activism with John & J.T.” podcast. This time, J.T. Ho and John were joined by Francis Stapleton, a managing director in Evercore’s strategic advisory practice. They discussed recent trends in activism. Topics covered during this 40-minute podcast include:
– Drivers of global surge in activism – 2025’s surge in M&A-driven activism – Evolution of experienced activists’ playbook – Reducing vulnerability to CEO-targeted activism – Dealing effectively with first-time activists – The small-cap activism landscape – Avoiding becoming a repeat activism target – Preparing for M&A-driven activism in 2026 – Top priority for boards preparing for activism
This podcast series is intended to share perspectives on key issues and developments in shareholder activism from representatives of both public companies and activists. They continue to record new podcasts, and they’re full of practical and engaging insights from true experts – so stay tuned!
This Cooley memo highlights some key takeaways from the first year of antitrust enforcement under Trump 2.0. This excerpt discusses some of the important ways that the DOJ & FTC have been more friendly to M&A than they were during the Biden administration:
‘Getting out of the way’ of nonproblematic deals. [FTC Chair Andrew] Ferguson summarized his view on merger enforcement: “If we think [a] merger is going to hurt Americans economically, I’m taking you to court. But if we don’t, we’ll get the hell out of the way.” Echoing this sentiment, the DOJ has also prioritized expediting reviews and redirected agency resources to identify those deals quickly and clear them without unnecessary delay.
A significant procedural update, which had been set in motion by the Biden administration, was the return to the practice of granting “early terminations” of statutory waiting periods under the HSR Act. Historically, early termination had been granted in about 80% of transactions where it was requested. There is not yet sufficient data available to assess if the cadence is similar.
Revival of structural remedies. A welcome development for dealmakers in 2025 was the return of merger remedies, often involving divestiture. Unlike the previous administration, which viewed remedies with skepticism and increasingly preferred litigation (though it did enter into some consents despite the rhetoric), current regulators are more open to addressing concerns with structural remedies in settlements.
In 2025, the DOJ and FTC brought 12 enforcement actions challenging mergers, nine of which resulted in consent orders. The agencies have tended to prefer divestitures, as reflected in the consents in Boeing/Spirit, ACT/Giant Eagle and Synopsys/Ansys, while a few other settlements involved behavioral remedies, as in Omnicom/IPG.
The memo cautions that while the environment is more deal-friendly than in recent years, the agencies are still willing to litigate if they aren’t happy with the deal and any proposed remedies.
Meredith blogged about the new and updated M&A-related CDIs that Corp Fin issued in January. This Hunton Andrews Kurth memo highlights how one of those CDIs, which provides companies with greater flexibility on the timing of broker searches, will facilitate shareholder approval of M&A transactions:
Companies will have more leeway in scheduling and preparing for shareholder meetings. This flexibility is particularly beneficial when seeking shareholder approval of M&A transactions, where timing and coordination are critical. Effectively, the new guidance will enable some transactions to close more quickly by allowing the record date to be set sooner, thus reducing the parties’ exposure to market risk. It may also be helpful for companies seeking to set a record date quickly to reduce the risk that activists or other interlopers try to purchase shares after the transaction is announced for the purpose of voting against it.
The CDI is also a welcome step by the Staff in terms of modernizing the proxy process. Proxy solicitors and practitioners have long viewed the 20-business day requirement as antiquated and unnecessary. Parties should consult with their proxy solicitors and Broadridge when conducting a broker search, however, to determine what will be adequate.
M&A-centered activism surged during the second half of 2025 and is expected to continue to rise during the current year. This Paul Weiss memo discusses M&A activism and offers some insights into how companies should prepare for it. This excerpt discusses how activists are likely to pursue M&A-centered campaigns in the coming months:
– Pushing for a strategic review at companies that are potential buyout targets. Small- and mid-cap public companies with strong cash flow could become targets for activists as private equity sponsors look to deploy dry powder. Companies operating in sectors that have been overlooked by the AI boom but otherwise have strong fundamentals may be particularly attractive given their relative valuation.
– Teaming up with sponsors to push for a sale. The line between private equity and activists often blurs during periods of robust dealmaking, and the coming months could signal a gradual return of private equity cooperation and teaming up with activists to put companies in play. Activists may also seek to broker deals by identifying potential targets for sponsors.
– Inserting themselves in strategically transformative transactions. Activists may seek to gain influence within companies rumored to be exploring a potential transaction in order to increase the odds of such a transaction being consummated. Such actions may include seeking access to information or nominating directors to the board.
– Opposing announced M&A and/or engaging in bumpitrage. Where announced transactions fail to meet market expectations (or in many cases, the activist’s expectations), activists may agitate against the transaction, or alternatively, urge the parties to revise the transaction terms in order to make a quick and outsized return.
– Pushing for break-ups and divestitures. Portfolio simplification will likely continue to be a priority for activists, as investors reward focused portfolios and easily understandable strategies. We expect companies with disparate or underperforming segments to continue to face activist pressure to simplify their operations through M&A.
The memo also highlights some of the unique challenges companies face in responding to M&A activism, most notably the greater legal constraints and heightened market scrutiny that accompanies M&A-related conversations, and it offers some advice on navigating these challenges.
On Friday, the Chancery Court added to the list of recent case law addressing aiding & abetting breach of fiduciary duty claims when Vice Chancellor Laster issued his decision in In re: EngageSmart Stockholder Litigation, (Del. Ch.; 2/26). In that case, the Vice Chancellor dismissed aiding & abetting claims against the buyer, but refused to dismiss similar claims brought against the target’s financial advisor.
The case arose out of a take-private transaction in which the company’s public stockholders were cashed out at a price of $23 per share. The controlling stockholder sold a portion of its shares, but rolled over its remaining shares into a 35% ownership interest in the surviving company. The controller also allegedly received an undisclosed $500 million post-closing dividend on the shares it rolled over.
The plaintiffs alleged breach of fiduciary duty and aiding & abetting against the parties involved in the transaction. In support of those claims the plaintiffs contended that the controlling stockholder dominated the transaction process and discouraged competing bids, that the target’s advisors were conflicted, and that the deal delivered non-ratable benefits to the controller at the expense of the public stockholders.
Despite the parties’ efforts to fit within the strictures of MFW (this was a pre-SB 21 transaction), Vice Chancellor Laster concluded that because the complaint plausibly alleged disclosure shortcomings, he would not apply MFW at the pleading stage, and the claims would be evaluated under the entire fairness standard. Since the defendants didn’t move to dismiss based on satisfaction of that standard, the Vice Chancellor allowed most of fiduciary duty claims to move forward.
In contrast, Vice Chancellor Laster dismissed aiding & abetting claims against the buyer, citing the Delaware Supreme Court’s recent decisions in Mindbody and Columbia Pipeline. However, he refused to dismiss such claims against the target’s financial advisor.
In reaching that conclusion, he cited allegations regarding the financial advisor’s collaboration with the controlling stockholder in structuring the transaction and in designing the marketing process, its “tipping” the buyer concerning an acceptable price, and its exclusion of the special committee’s financial advisor from involvement in the sale process. He also pointed to existing business relationships between the financial advisor, the controller and the buyer.
The plaintiffs also alleged that the financial advisor aided & abetted disclosure violations by the target. Vice Chancellor Laster deferred ruling on this claim, based on what he considered tension between the Delaware Supreme Court’s rulings in RBC Capital and its more recent decisions in Mindbody and Columbia Pipeline. Here’s an excerpt from his opinion:
If RBC Capital remains good law, then the allegations against Goldman state a claim for aiding and abetting a breach of the duty of disclosure. This decision has found that the Proxy Statement failed to disclose the full extent of Goldman’s relationships with General Atlantic, Vista, and Summit. This decision has also found that the Proxy Statement failed to provide an accurate picture of Goldman’s role.
At the pleading stage, it is inferable that Goldman withheld the pertinent information, putting this case on all fours with RBC Capital and stating a claim on which relief can be granted. That outcome also comports with Electric Last Mile, a post-Mindbody, post-Columbia Pipeline decision that upheld a claim for aiding and abetting disclosure violations against a financial advisor on similar facts.
Admittedly, the logic of Mindbody and Columbia Pipeline pulls in the other direction, at least for the Restatement element that considers the nature and amount of assistance given by the secondary actor. Under those decisions, Goldman would have to owe a duty to the public stockholders. Although RBC Capital supports the existence of such a duty, it does so in passing and only in three words.
Vice Chancellor Laster went on to say that RBC Capital has not been widely read to recognize this direct duty of disclosure to stockholders, and that reading it this way would break new ground. He also pointed out that under a more conventional theory based on the financial advisor’s duty of disclosure to the target, Mindbody and Columbia Pipeline indicate that failing to provide information in the face of a known duty amounts only to passive inaction, which is insufficient to impose aiding & abetting liability.
In light of these uncertainties, and because he allowed the other aiding & abetting claims against the financial advisor to move forward, the Vice Chancellor determined to defer addressing the disclosure-based claims until trial.
On Friday, the Delaware Supreme Court issued its decision in Rutledge v. Clearway Energy, (Del. 2/26), in which the Court unanimously concluded that SB 21’s amendments to the DGCL were constitutional.
During the contentious debate over SB 21, academic commentators raised the issue of whether the statute limited the equitable powers of the Chancery Court in a way that violated provisions of Delaware’s constitution. Shortly after the amendments were enacted, plaintiffs filed constitutional challenges to SB 21, and the Chancery Court subsequently certified the following constitutional questions to the Delaware Supreme Court:
1. Does Section 1 of Senate Bill 21, codified at 8 Del. C. § 144— eliminating the Court of Chancery’s ability to award “equitable relief” or “damages” where the Safe Harbor Provisions are satisfied—violate the Delaware Constitution of 1897 by purporting to divest the Court of Chancery of its equitable jurisdiction?
2. Does Section 3 of Senate Bill 21—applying the Safe Harbor Provisions to plenary breach of fiduciary claims arising from acts or transactions that occurred before the date that Senate Bill 21 was enacted—violate the Delaware Constitution of 1897 by purporting to eliminate causes of action that had already accrued or vested?
The Court, in an opinion written by Justice Traynor, held that neither of the challenged provisions violated Delaware’s Constitution. Here’s an excerpt from Justice Traynor’s discussion of the first certified question:
SB 21 does not divest the Court of Chancery of jurisdiction of any cause of action, nor does it direct any claim or category of claims to another court. Breach of fiduciary duty claims remain within the undisputed jurisdiction of the Court of Chancery. Indeed, Rutledge’s claim itself remains within the Court of Chancery’s jurisdiction, albeit subject to a review framework he finds unfavorable.
Although the relief—equitable relief or damages—the Court of Chancery formerly would consider is now unavailable when it determines that a challenged transaction has been approved by one of the two statutorily designated cleansing mechanisms, SB 21 does not strip the court of its jurisdiction over equitable claims. Instead, SB 21 represents, in our view, a legitimate exercise of the General Assembly’s authority to enact substantive law that, in its legislative judgment, serves the interests of the citizens of our State.
The Court also concluded that SB 21 did not divest the plaintiff from a cause of action that had already accrued:
[C]ontrary to what Rutledge contends, SB 21 does not extinguish his right of action. He may yet challenge the Clearway transaction based upon allegations that Clearway’s CEO and majority stockholders breached their fiduciary duties. To be sure, the court must now review the challenged transaction under statutory standards that changed after the transaction closed but before Rutledge filed suit. It is highly questionable, however, that the statutory change effected the extinguishment of Rutledge’s vested right. His interest, to the contrary, appears to be more “an anticipated continuance of the existing law” than a vested property right.
While there are undoubtedly many battles to come over the scope and operation of the changes to the DGCL enacted in SB 21, it appears that Friday’s decision from the Delaware Supreme Court at least puts the constitutional issues to rest.
In mid-February, in Fortis Advisors v. Stillfront (Del. Sup; 2/26), the Delaware Supreme Court determined that a merger agreement’s alternative dispute resolution provision requiring an accounting firm to resolve disputes regarding the “calculation of the earnout amount” provided for “arbitration” rather than “expert determination” (an often disputed and consequential distinction) and determined that the firm had authority to resolve all earnout issues — including legal ones. This meant that the accounting firm appropriately addressed whether the buyer acted in bad faith to reduce the earnout amount or breached operational covenants related to the earnout, even though these determinations involved no “calculations.” The Court upheld the Chancery Court’s decision enforcing the outcome of arbitration (concluding all earnout-related disputes in the buyer’s favor), which was determined fully by the accounting firm.
It has happened before (and will happen again) that a merger agreement uses the word “arbitration” when referring to an accounting firm resolving disputes, and one party argues that the firm should have only been permitted to make an “expert determination.” As this Fried Frank alert notes, that’s not what happened here. The use of the word “calculation” plus testimony factored heavily into the Court’s decision.
Delaware courts have interpreted ADR provisions similar to the Stillfront ADR […] as calling for an expert determination, not an arbitration. The Stillfront opinion, which notes these decisions, suggests that the Supreme Court also would have found that the Stillfront ADR called for an expert determination, if not for the unique fact that the plaintiff, in oral argument at the Court of Chancery, had conceded (indeed, had been “emphatic”) that the parties had agreed to arbitrate their earnout disputes. The plaintiff changed this view only after the accounting firm arbitrator determined that no earnout amount was owed [. . .] The Supreme Court stated that it would “hold” the plaintiff to its initial position.
It also notes that ambiguity often arises when the ADR provisions provide for resolution of “calculation” disputes.
[T]he Supreme Court viewed disputes about compliance with earnout-related operational covenants and good faith requirements as coming within the ambit of the ADR provision governing resolution of disputes over “calculation” of the earnout, as such compliance affected what the amount of the earnout would be. [. . .] The Supreme Court viewed “calculation” disputes as subsuming disputes that related to “the accuracy of the buyer’s earnout determination” (i.e., the amount of the earnout owed). Stillfront’s conduct underlying the Bad Faith Claims “had a direct bearing on how the Earnout Amount should be determined,” and indeed “proffer[ed] [Fortis’s] explanation as to why Stillfront’s Earnout Determination Statement was flawed,” the Supreme Court wrote.
After discussing recent cases with similar ADR provisions that went the other way, the alert gives some drafting tips for practitioners:
Most critically, the parties should specify whether the ADR expert will act as an arbitrator or as an expert.Parties should consider whether to identify specific issues, or types of issues, as to which the expert will act as an arbitrator, others as to which it will act as an expert, and others as to which it will not act and the court will decide. The issues specified might be those that typically require consideration of both expert and legal issues to resolve (such as whether financial statements were prepared consistent with past practice, whether an earnout statement contained sufficient detail, or whether a milestone was met); or those that are most likely to occur or to be significant in the particular factual context. Parties may want to consider a default provision that states that an arbitration, or instead an expert determination, will be utilized where it is otherwise uncertain which would apply.
Provisions calling for the decision-maker to resolve “all” disputes, or “any” dispute, or to “interpret” the parties’ agreement, often are viewed as indicating an arbitration process. Provisions calling for limited authority of the decision-maker, no specific procedures for the process, a short or informal process, no discovery or hearing, no authority to award relief, and/or a determination that is not final and binding on the parties, are often viewed as indicating an expert determination process.
A provision calling for resolution of disputes over “calculation” of an earnout (or other post-closing adjustment) may be interpreted as conferring broad authority to resolve disputes that do not involve actual calculations but relate to what the earnout amount will be. Parties should consider specifying that the decision-maker will have authority to determine only financial- or accounting-related metrics, principles and calculations, and not broader legal issues that may relate to the earnout amount owed (such as determining whether a milestone was met, or a party complied with operational, good faith, or efforts covenants).
The insurance policies at issue followed form to a “bump‑up” provision found in the definition of “Loss” in the primary policy which states that, in the event of a claim alleging inadequate price or consideration for an acquisition of all or substantially all of an entity, “Loss” shall not include any amount of any judgment or settlement representing the amount by which such price or consideration is effectively increased (defense costs and non‑indemnifiable loss excepted). The Delaware Supreme Court construed this provision applying a two-pronged analysis: (1) did the claim allege inadequate consideration; and (2) does the settlement represent an effective increase in the consideration.
The Delaware Supreme Court affirmed judgment for Harman, concluding that the insurance companies failed the second prong of the analysis even though they satisfied the first. The court held that the underlying Section 14(a) claim alleged inadequate consideration, but the record did not show that any portion of the $28 million settlement “represented” an effective increase in the merger consideration. Accordingly, the bump‑up provision did not apply, and coverage for the settlement was affirmed.
John shared a Hunton memo at the time of the Delaware Superior Court decision that noted that the decision is particularly significant for policyholders incorporated in Delaware. The Delaware Supreme Court has said that Delaware law should apply to disputes involving D&O policies sold to Delaware-chartered companies, and other courts have come out differently. In June, John blogged about a 4th Circuit decision holding that the bump-up exclusion precludes coverage for the underlying settlement. Companies facing potential bump-up exclusion challenges may be incentivized to litigate coverage claims in Delaware courts.