A footnote in a recent Delaware decision should relieve some of the anxiety felt in the investment banking community that the courts were inviting plaintiffs to allege fiduciary duty breaches by a target board in any sale where the fairness opinion analysis could be perceived as “weak”.
In the never-ending quest to construct claims to attack virtually every announced public M&A transaction, plaintiff attorneys continuously seek to exploit new angles that appear to gain any amount of traction with the Delaware courts. In a May 2013 decision in Netspend, the court found that the plaintiffs had shown a likelihood of success on the merits of a Revlon claim arising out of a single-bidder sale process. Among the factors cited by VC Glasscock as giving rise to the likely breach of fiduciary duties was the board’s reliance on what he termed a “weak” fairness opinion. The court noted that the deal price of $16 was well below the valuation range implied by the financial adviser’s discounted cash flow (DCF) analysis ($19.22 to $25.52), although within the range of values implied by the other two primary methodologies (comparable companies and comparable transactions, both of which the court discounted because of the lack of similarities to the precedents cited).