Posts Tagged ‘Mergers & acquisitions’

Timely Notice of Merger’s Effective Date Reduces Litigation Risks in Delaware

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday July 26, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Jon E. Abramczyk, Partner and Member of the Corporate and Business Litigation Group at Morris, Nichols, Arsht & Tunnell LLP, and is based on a Morris Nichols publication. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Following a merger (or consolidation), Section 262 of the Delaware General Corporation Law (“DGCL”) requires notice to be sent to any stockholder of record who has demanded appraisal informing that stockholder that the transaction was accomplished. For long-form mergers approved pursuant to a stockholder vote (i.e., under Section 251(c) of the DGCL), Section 262(d)(1) requires notice of the effective date of the merger to be sent within 10 days of the merger becoming effective. For mergers approved pursuant to Sections 228, 251(h), 253 or 267 of the DGCL (e.g., mergers approved by written consent, certain mergers following a tender or exchange offer, short-form mergers between parent and subsidiary corporations and short-form mergers between a non-corporation parent entity and its subsidiary corporation) the notice of the effective date is governed by Section 262(d)(2), which sets its own timing requirements.

…continue reading: Timely Notice of Merger’s Effective Date Reduces Litigation Risks in Delaware

Exclusive Forum Provisions: A New Item for Corporate Governance and M&A Checklists

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday July 14, 2014 at 9:19 am
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Editor’s Note: The following post comes to us from Michael O’Bryan, partner in the Corporate Department at Morrison & Foerster LLP, and is based on a Morrison & Foerster Client Alert by Mr. O’Bryan, Kevin Calia, and James Beha. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Public companies increasingly are adopting “exclusive forum” bylaws and charter provisions that require their stockholders to go to specified courts if they want to make fiduciary duty or other intra-corporate claims against the company and its directors.

Exclusive forum provisions can help companies respond to such litigation more efficiently. Following most public M&A announcements, for example, stockholders file nearly identical claims in multiple jurisdictions, raising the costs required to respond. Buyers also feel the pain, since they typically bear the costs and may even be named in some of the proceedings. Exclusive forum provisions help address the increased costs, while allowing stockholders to bring claims in the specified forum.

…continue reading: Exclusive Forum Provisions: A New Item for Corporate Governance and M&A Checklists

Delaware Court Declines to Dismiss Class Action Challenging Going-Private Transaction

Editor’s Note: Allen M. Terrell, Jr. is a director at Richards, Layton & Finger. This post is based on a Richards, Layton & Finger publication, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Hamilton Partners, L.P. v. Highland Capital Management, L.P., C.A. No. 6547-VCN, 2014 WL 1813340 (Del. Ch. May 7, 2014), the Court of Chancery, by Vice Chancellor Noble, in connection with a challenge to a going-private transaction whereby American HomePatient, Inc. (“AHP”) was acquired by an affiliate of one of its stockholders, Highland Capital Management, L.P. (“Highland”), refused to dismiss breach of fiduciary duty claims against Highland. The Court held that, for purposes of defendants’ motion to dismiss, plaintiff alleged facts sufficient to support an inference that Highland, which owned 48% of AHP’s stock and 82% of AHP’s debt, was the controlling stockholder of AHP and that the merger was not entirely fair.

…continue reading: Delaware Court Declines to Dismiss Class Action Challenging Going-Private Transaction

Do Going-Private Transactions Affect Plant Efficiency and Investment?

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday July 8, 2014 at 9:17 am
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Editor’s Note: The following post comes to us from Sreedhar Bharath of the Department of Finance at Arizona State University, Amy Dittmar of the Department of Finance at the University of Michigan, and Jagadeesh Sivadasan of the Department of Business Economics and Public Policy at the University of Michigan.

Are private firms more efficient than public firms? Jensen (1986) suggests that going-private could result in efficiency gains by aligning managers’ incentives with shareholders and providing better monitoring. In our paper, Do Going-Private Transactions Affect Plant Efficiency and Investment?, forthcoming in the Review of Financial Studies, we examine a broad dataset of going-private transactions, including those taken private by private equity, management and private operating firms between 1981 and 2005. We link data on going-private transactions to rich plant-level US Census microdata to examine how going-private affects plant-level productivity, investment, and exit (sale and closure). While we find within-plant increases in measures of productivity after going-private, there is little evidence of efficiency gains relative to a control sample composed of firms from within the same industry, and of similar age and size (employment) as the going-private firms. Further, our productivity results hold excluding all plants that underwent a change in ownership after going-private, alleviating the potential concern that control plants may undergo improvements through ownership changes.

…continue reading: Do Going-Private Transactions Affect Plant Efficiency and Investment?

Delaware Court: Lack of Fairness Opinion Not Necessarily Constitute Bad Faith

Posted by Allen M. Terrell, Jr., Richards, Layton & Finger, on Monday July 7, 2014 at 9:07 am
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Editor’s Note: Allen M. Terrell, Jr. is a director at Richards, Layton & Finger. This post is based on a Richards, Layton & Finger publication, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Houseman v. Sagerman, C.A. No. 8897-VCG, 2014 WL 1600724 (Del. Ch. Apr. 16, 2014), the Court of Chancery, by Vice Chancellor Glasscock, in addressing defendants’ motion to dismiss claims related to the 2011 acquisition of Universata, Inc. (“Universata”) by HealthPort Technologies, LLC (“HealthPort”), held that the failure to obtain a fairness opinion in connection with the acquisition did not rise to the level of bad faith on the part of the board of directors of Universata (the “Board”) and did not support an aiding and abetting claim against the Board’s financial advisor.

…continue reading: Delaware Court: Lack of Fairness Opinion Not Necessarily Constitute Bad Faith

Value Protection in Stock and Mixed Consideration Deals

Posted by Daniel E. Wolf, Kirkland & Ellis LLP, on Wednesday June 18, 2014 at 9:02 am
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Editor’s Note: Daniel Wolf is a partner at Kirkland & Ellis focusing on mergers and acquisitions. The following post is based on a Kirkland memorandum by Mr. Wolf, David B. Feirstein, and Joshua M. Zachariah.

As confidence in M&A activity seems to have turned a corner, the use of acquirer stock as acquisition currency is a serious consideration for executives and advisers on both sides of the table. A number of factors play into the renewed appeal of stock deals, including an increasingly bullish outlook in the C-level suite and higher and more stable stock market valuations, as well as deal-specific drivers like the need for a meaningful stock component in tax inversion transactions (see recent post on this Forum).

…continue reading: Value Protection in Stock and Mixed Consideration Deals

California Superior Court Enforces Exclusive Forum Bylaw

Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Glen T. Schleyer, Joseph B. Frumkin, John L. Hardiman, and Alexandra D. Korry. The complete publication, including footnotes and annex, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Following the Delaware Court of Chancery’s decision in July 2013 upholding the validity of exclusive forum bylaws, a number of corporations, including over two dozen S&P 500 companies, amended their bylaws to include these provisions, and the provisions were commonly included in the charters or bylaws of companies in initial public offerings. Many public companies, however, determined to take a wait-and-see approach, in order to assess whether non-Delaware courts would enforce the bylaw and whether companies that adopted the bylaw received negative investor feedback in the 2014 proxy season or otherwise.

…continue reading: California Superior Court Enforces Exclusive Forum Bylaw

Proposed Dodd-Frank Concentration Limit on Financial Institution M&A Transactions

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 11, 2014 at 9:00 am
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Editor’s Note: The following post is based on a Davis Polk publication by Luigi L. De Ghenghi, Randall Guynn, Margaret E. Tahyar and Andrew S. Fei; the full publication, including visuals, tables and flowcharts, is available here.

In May 2014, the Federal Reserve issued a proposal that would implement the financial sector concentration limit set forth in Section 622 of the Dodd-Frank Act. The proposal reflects the Financial Stability Oversight Council’s January 2011 Study and Recommendations Regarding Concentration Limits on Large Financial Companies.

The concentration limit generally prohibits a financial company from merging or consolidating with, acquiring all or substantially all of the assets of, or otherwise acquiring control of another company if the “liabilities” of the resulting financial company, calculated using methodologies in the proposal, exceed 10% of aggregate financial sector liabilities.

…continue reading: Proposed Dodd-Frank Concentration Limit on Financial Institution M&A Transactions

Shareholder Activism in Germany

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday June 7, 2014 at 9:05 am
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Editor’s Note: The following post comes to us from Dirk Besse, at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Besse and Moritz Heuser.

Over the past few years there has been a noticeable increase in the frequency of activist investors building up considerable stakes in German listed companies in the context of public takeovers. One reason for this development is what appears to be a new business model of hedge funds—the realization of profits through litigation after the completion of a takeover. To this end, the funds take advantage of minority shareholder rights granted under German stock corporation law in connection with certain corporate measures which are likely to be implemented for business integration purposes following a successful takeover.

…continue reading: Shareholder Activism in Germany

Activist Hedge Funds Find Ways to Profit from M&A Transactions

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 4, 2014 at 9:28 am
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Editor’s Note: The following post comes to us from Spencer D. Klein, partner in the Corporate Department and co-chair of the global Mergers & Acquisitions Group at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Klein, Enrico Granata, and Isaac Young; the complete publication, including footnotes, is available here.

Activist hedge funds continue to find ways to use public M&A transactions as a tool to generate returns for their investors. As a result, market participants need to consider potential activist strategies in determining how to structure, announce and execute their deals.

Activists have used three principal strategies to extract additional value from public M&A transactions. The first strategy involves directly challenging the announced deal in an effort to extract a higher price, defeat the merger and/or pursue an alternative transaction or stand-alone strategy. The second strategy involves attempting to use statutory appraisal rights to create value for the activist. And the third strategy involves making an unsolicited offer to acquire a target, either independently or in conjunction with a strategic acquirer, to put the target in play. In this article, we discuss examples of recent uses of these strategies by activist investors and point out some general implications of these examples for transaction planners.

…continue reading: Activist Hedge Funds Find Ways to Profit from M&A Transactions

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