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Updated Guidance (and Ground Rules) for Controlling Stockholder Deals

The Delaware Supreme Court’s 2014 decision in Kahn v. M&F Worldwide (“MFW”) provided a business judgment rule protection for controlling stockholder transactions which are conditioned from the outset on certain procedural protections being utilized, including approval by (1) a fully-empowered independent special committee and (2) a fully-informed, uncoerced vote of a majority of the target minority stockholders unaffiliated with the controller. While MFW provided helpful guideposts for avoiding entire fairness review in controlling stockholder transactions, questions remained as to the application of MWF to different types of deals and negotiations, and the consequences of small deviations from strict adherence to MFW. Recent guidance from the Delaware Court of Chancery has given way to updated ground rules for controlling stockholder transactions: (i) MFW also applies to deals where the controlling is only on the sell-side; (ii) other conflicted controller transactions besides mergers, such as recapitalizations, are eligible for MFW protection; and (iii) small foot faults will not cause the business judgment rule protection afforded by MFW to be lost.

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The Ropes Recap: Mergers & Acquisitions Law News

Practices: Mergers & Acquisitions

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Linked is the Third Quarter 2015 edition of the Ropes & Gray M&A Newsletter. Topics addressed in this edition include:

News from the Courts

  • Delaware Court Awards $148 Million in Damages, as Fiduciaries’ Bad Faith Conduct Prevented Stockholders from Obtaining a “Fairer Price” in Take-Private Transaction
  • Delaware Court Denies Claims for Advancement in Two Recent Cases on the Basis of “By Reason of the Fact” Standard
  • Delaware Court Continues to Scrutinize Disclosure-Only Settlement Cases
  • Technicalities Disqualify Dell Stockholders’ Appraisal Rights under “Continuous Holder” Requirements
  • Delaware Supreme Court Confirms Effect of Majority Vote of Disinterested, Informed Stockholders

Accounting Standards Update

  • The End of Extraordinary Items
  • FASB Proposes “Materiality” Guidance

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