Tips from the Trenches: M&A Trends for 2011 John F. Grossbauer Michael K. Reilly Potter Anderson &...
10
Tips from the Trenches: M&A Trends for 2011 John F. Grossbauer Michael K. Reilly Potter Anderson & Corroon LLP Dallas Bar M&A Section Meeting February 8, 2011
-
Upload
bryan-robinson -
Category
Documents
-
view
213 -
download
0
Transcript of Tips from the Trenches: M&A Trends for 2011 John F. Grossbauer Michael K. Reilly Potter Anderson &...
Tips from the Trenches: M&A Trends for 2011
John F. Grossbauer
Michael K. Reilly
Potter Anderson & Corroon LLP
Dallas Bar M&A Section Meeting
February 8, 2011
2
The Latest On Delaware M&A: The Friendly Two Step Tender Offer
M&A and the “Unified Theory”: A New Roadmap
Revlon Revisited: When, Why and Who Really Cares Anyway?
Post-Closing Adjustments: Some Comfort and a Caution
Poison Pills: The Latest Developments Arbitration in the Court of Chancery: A New
Option For Contracting Parties
M&A Trends for 2011
3
The Latest On Delaware M&A: The Friendly Two Step Tender Offer Trend favoring the friendly two step
– Modification of Best Price Rule– Timing Advantages– Result = 30% in 2007, 49% in 2008, 61% in 2009
Top-up option– Need Significant Authorized Shares– Terms of the note
• Cash for aggregate par value?
– Appraisal Issues• Olson v. ev3, Inc.• In re Cogent, Inc. S’holder Litig.
Indenture or other issues?
4
M&A and the “Unified Theory”: A New Roadmap
Majority Stockholders: Have the rules changed? One Step Mergers
– In re John Q. Hammons Hotels Two Step Mergers
– CNX – Supreme Court declined interlocutory appeal – Cox Radio – Supreme Court does not address
Structure for business judgment? Effect on deal value? Burden shifting is still available Another example of Court preference for
proactive directors
5
Revlon Revisited: When, Why and Who Really Cares Anyway?
Revlon triggers– Initiate active bidding process– Abandon long term strategy in favor of break-up– Change of control
End stage transactions– Reverse-split freeze-outs
• Reis v. Hazelett Strip-Casting Corp.
– Mix of stock and cash mergers• Steinhardt v. Howard-Anderson (Occam)
– Stock for stock mergers (the whale and minnow) Effect of triggering Revlon
– Reasonableness standard of review– Contextually specific obligations of the board– No blueprint
6
Revlon Revisited: When, Why and Who Really Cares Anyway?
What’s the Remedy?– Lyondell and 102(b)(7) (but what about officers?)– Forgo v. Health Grades, Inc. (Transcript)
“[T]he number of times that this Court has ever enjoined stockholders from considering a premium-generating transaction in the absence of fear of a disclosure violation or coercion and the absence of a higher competing offer…- it’s basically a null-set.”
– In re Cogent, Inc. S’holder Litig. (absence of favoring one bidder over another).
– Possibility of an injunction remedy nevertheless?
Disclosure violations– Maric Capital; Art Technology; Zenith; Occam
Omnipresent duty to maximize value Deal protections and process – intertwined
7
Post-Closing Adjustments: Some Comfort and a Caution
Drafting the escrow properly– Imposing obligations vs. Adjusting merger consideration
Aveta v. Bengoa – Post-closing adjustment enforced– Court relied on statutory authority (facts ascertainable)– Implies limits on ability to bind non-signers
Implications for deals with escrows– Properly drafted escrows work– Enforceability issues for “stockholder reps”– Doubt about whether non-signers can be bound to true
indemnification provisions– Court may be skeptical about deductions for appraisal
claims
8
Poison Pills: The Delaware Handbook
Keeping the Pill “on the shelf”– “Window Closing Pill” inconsistent with this strategy
Using the Pill to protect NOLs– Selectica– Impact on Proxy Contests?
Using the Pill to defend against activists– Barnes & Noble– Impact on Proxy Contests?
Using the Pill to protect the corporate culture– Craigslist v. eBay
When must Pill be redeemed?– Airgas
Should targets adopt a Pill in a friendly deal?
9
Arbitration in the Court of Chancery: A New Option
Permits business entities to consent to voluntary binding arbitration
Chancellor, Vice Chancellor or Master Three distinct advantages:
– Confidential proceedings– Swift resolution– Opportunity to resolve monetary disputes
Mechanics– Agreement to arbitrate (which can predate dispute)– All parties must have consented– At least one party a Delaware business entity– No party may be a consumer– For monetary relief, amount must exceed $1 million
10
John F. GrossbauerDirect Dial: (302) 984-6131
Email: [email protected]
Michael K. ReillyDirect Dial: (302) 984-6181Email: [email protected]
Potter Anderson & Corroon LLPHercules Plaza, 6th Floor
1313 North Market Street
Wilmington, DE 19801
www.potteranderson.com
