Mergers & Acquisitions

In Shareholder Representative Services LLC v. Albertsons Companies, Inc., 2021 WL 2311455 (Del. Ch. June 7, 2021), the Delaware Court of Chancery (Slights, V.C.) provided key guidance on mergers and acquisitions (“M&A”) earnout disputes regarding contractual earnout language, the applicability of the implied covenant of good faith and fair dealing, extra-contractual discussions and promises and post-closing behavior of the acquirer.  This opinion serves as a reminder to M&A transaction parties on important drafting concepts in earnouts, as well as how to conduct themselves during the negotiations and earnout period.
Continue Reading Delaware Court of Chancery Decision Provides Guidance on M&A Earnouts

This article originally published on Food Manufacturing.com on June 1.

2020 was an up-and-down year for mergers and acquisitions in the food and beverage industry.  With the onset of the COVID-19 pandemic in the first half of the year, deal making activity was largely put on hold.  In the second half of the year, however, M&A activity resumed in force such that the total number of food and beverage transactions for 2020 actually ended up slightly exceeding 2019.  And with private equity firms sitting on a large amount of cash that needs to be deployed and strong corporate balance sheets for strategic buyers, 2021 looks like it should be a banner year for food & beverage M&A.  However, buying and selling food & beverage companies presents a unique set of challenges.  This article provides an overview of certain legal considerations for parties engaging in M&A transactions in this sector to be aware of with the goal of providing actionable advice to maximize value.
Continue Reading Keys to Maximizing Value in Food & Beverage M&A Transactions

As anyone who follows the industry can tell you, mergers and acquisitions activity in the aerospace and defense industry has remained robust over the past decade.  In 2019 alone, there were 460 corporate acquisitions in this sector.  And while a slowdown in 2020 deal activity is certainly expected as a result of the COVID-19 pandemic, results for at least the second quarter remained strong, with 84 deal closings.  Further, analysts project that activity in certain subsegments of the industry, including defense, space technology and cyber security, will remain vigorous for the foreseeable future, at least partially offsetting any declines in commercial aerospace transactions.
Continue Reading M&A Pre-Flight Check: Avoiding Common Issues in Aerospace & Defense Acquisitions

As anyone who has been through a corporate sale process can tell you, there is no such thing as a “standard” M&A transaction.  Every deal is different and presents a unique set of challenges.  This is especially true of transactions involving lead generation companies, which can be very different than businesses in other industries.  Amongst other differences, companies in this space utilize a wide variety of customized commercial arrangements and are subject to numerous industry-specific regulatory requirements that buyers need to be aware of before making an investment in this space.  In this article, we highlight the top 10 issues that buyer should diligence when considering acquiring a lead generation company.  Sellers in this space should focus on eliminating any issues in these areas as well to make them a more attractive acquisition target.
Continue Reading Top 10 Diligence Issues in Lead Generation Mergers and Acquisitions

  1. Lower Thresholds For HSR Filings

On February 1st, 2021, the Federal Trade Commission announced revised, lower thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in Gross National Product (GNP) and had not been lowered since 2010.
Continue Reading Lower Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

In Heinze v. Tesco Corp., No. 19-20298, 2020 WL 4814094 (5th Cir. Aug. 19, 2020), the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a putative class action suit under Section 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78(b) alleging that defendant Tesco Corporation (“Tesco”), former members of Tesco’s board of directors and Nabors Industries, Ltd. (“Nabors”) omitted material information from a proxy statement issued in connection with Nabors’ acquisition of Tesco in 2017.  Applying the heightened pleading standard of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4, et seq., the Court held that plaintiffs failed to show how the omitted facts were necessary to make the statements therein not false or misleading.  Heinze marks a significant victory for companies facing Section 14(a) shareholder litigation over merger-related proxy statements, reaffirming the PSLRA’s specificity requirements as well as its safe harbor provision shielding companies from liability over certain forward-looking statements and projections.
Continue Reading Fifth Circuit Affirms Dismissal of Section 14(a) Complaint For Failure to Plead Facts Demonstrating Alleged Omissions from Proxy Statement Were Misleading

IN RE DELL TECHNOLOGIES INC. CLASS V STOCKHOLDERS LITIGATION

There has been a growing deference in Delaware courts for transactions approved by independent special committees and minority stockholders. In the context of a company with a controlling stockholder, the Delaware Supreme Court has provided guidance in Kahn v. M&F Worldwide Corp.[1] (“MFW”) on how boards can structure special committees and minority stockholder votes to have board decisions adjudicated under the highly deferential protection of the business judgment rule.[2] However, the Delaware Court of Chancery recently found in In re Dell Technologies Inc. Class V Stockholders Litigation[3] (“Dell”) that it was reasonably conceivable that the conditions established in MFW had not been satisfied in the transaction under review resulting in the application of the more onerous entire fairness standard of review.[4] The opinion in Dell provides helpful insight for boards as they navigate transactions involving controlling stockholders.[5]
Continue Reading Board Guidance: Getting To Business Judgment Rule Deference When You Have A Controlling Stockholder

Merger agreements involving acquisitions of private companies often contain terms creating post-merger obligations or “earnouts” in favor of certain classes of selling stockholders.  To address potential claims that may arise from such post-merger arrangements, selling stockholders typically designate a “shareholder representative” to handle such claims on their behalf pursuant to specifically delineated rights and duties.  In Fortis Advisors, LLC v. Allergan W.C. Holding, Inc., 2020 Del. Ch. LEXIS 181 (Del. Ch. May 14, 2020) (Zurn, V.C.), the Delaware Court of Chancery addressed the scope of such rights and duties in the context of a discovery dispute.  The Court considered the shareholder representative to be distinct from the selling stockholders on whose behalf the representative is acting, such that the selling stockholders were not deemed to be “parties” to a claim pursued by the representative.  Thus, in a letter ruling, the Court held that the defendant could obtain discovery of the selling stockholders only through third-party discovery, not through party discovery directed to the shareholder representative.  The Court based its decision on a strict reading of the terms of the agreements establishing the shareholder representative and negotiated information rights contained therein.
Continue Reading Delaware Court of Chancery Strictly Construes Right to Discovery of Stockholders Represented By a Contractually Created “Shareholder Representative”

The current COVID-19 pandemic is causing an unprecedented negative impact on businesses around the globe in nearly every sector of the economy.  Both the US Government as well as Foreign Governments have and will continue to provide short- and long-term financial support to these businesses.  However, this financial assistance will not be available to every business, nor will it be adequate in all instances to offset decreased revenue resulting directly and indirectly from the pandemic.  As a result, many businesses will be unable to accurately forecast and will not have the necessary liquidity to ride out the pandemic, and will seek solutions to preserve value for their stakeholders, including through the pursuit of a sale.  Both strategic purchasers and institutional investors will have opportunities to purchase these businesses (or certain related assets) either through a regular sale process or under the supervision of a bankruptcy court.  Due to the nature of these sales, a number of additional issues arise that potential purchasers should bear in mind.
Continue Reading Distressed Acquisitions – Key Considerations

The World Health Organization declared the outbreak of the novel coronavirus disease (COVID-19) a pandemic, prompting numerous public and private organizations and agencies to accelerate their contingency plans so as to mitigate continued transmission. The responses to this public health concern have also introduced additional uncertainty and complexities into the process and administration of merger and acquisition transactions. Below is a list of considerations for pending and prospective acquisitions during this time of uncertainty that could help mitigate potential adverse effects.
Continue Reading Impacts of Covid-19 on Closing M&A Transactions

Higher Thresholds For HSR Filings

On January 28, 2020, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in Gross National Product (GNP).

The new thresholds will become effective on February 27, 2020. Acquisitions that have not closed by the effective date will be subject to the new thresholds.
Continue Reading Higher Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced