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

News from the Courts 

  • Delaware Chancery Court Finds That Dispute Over Accounting Methodology Is Subject to Arbitration Procedures 
  • Delaware Supreme Court Finds Purchaser Did Not Breach Earn-Out Provision 
  • Delaware Court Closely Scrutinizes Director Compensation 
  • Delaware Chancery Court Finds Restriction on Poison Pills Does Not Apply to Spun-Off Entity 
  • Board’s Refusal to Seat a Director Represented by Opposing Litigation Counsel is Consistent with its Fiduciary Duty 
  • Plaintiffs Strike Out in Two Recent Delaware Appraisal Actions 
  • Delaware Chancery Court Approves Settlement Agreement for $275 Million in Derivative Suit 
  • Delaware Chancery Court Describes Standards for Attorneys' Fees 

Delaware Legislative Update

Notable Deals 

  • Acquiring a Competitor: The Impact of “Foreign” on HSR Act Analysis 

London Update 

  • Avoiding Pitfalls When Serving Notice: IPSOS S.A. v. Dentsu Aegis Network Limited

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