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

News from the Courts

  • The Demise of Disclosure-Only Settlements? The Court of Chancery Outlines a New Regime
  • Delaware Supreme Court Upholds Court of Chancery Rulings in the Rural/Metro Case
  • Court of Chancery Reverses Finding of Financial Advisor Aiding and Abetting Liability for Lack of an Underlying Breach
  • Hostile Bid Prevented by Confidentiality Agreement
  • Delaware Court of Chancery Invalidates Charter & Bylaw Provisions Allowing Only “For Cause” Director Removal Where Board Is Unclassified
  • Oregon Supreme Court Enforces Delaware Exclusive Forum Selection Bylaw
  • Delaware Supreme Court Upholds Award of Expectation Damages in Breach of Contract Claim
  • Delaware Court of Chancery Opinion Provides Guidance on the Interpretation of Contractual Provisions Relating to Fraud-Based Claims
  • Delaware Supreme Court Draws Inference that Controller’s Long-Term Friend Is Not Independent
  • Delaware Court of Chancery Binds Investor to Contractually Mandated Fair Value Assessment Determination

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