United States: The Ropes Recap: Mergers & Acquisitions Law News - November 5, 2018


WHILE ACTIVITY REMAINED STRONG, particularly during the end of the quarter, little noteworthy case law came out during the third quarter of 2018. Then, the day after the quarter ended, the Delaware Chancery Court released Akorn v. Fresenius, and got the entire M&A world talking. As the dust settles, it doesn't seem as if Akorn will be most debated because of its facts (most view it as a bespoke holding, as evidenced by the 246 pages it took VC Laster to walk us through it), but rather because it has made ev­ery M&A lawyer change one of their most tried and true statements about M&A agreements—notably, that the Del­aware courts had never before found a "Material Adverse Effect." Well, assuming the decision survives appeal, they now have.

Beyond Akorn, we did see a couple of key decisions from the Chancery Court. The court rejected a preliminary in­junction to block a stockholder vote on the proposed $7 billion merger of drywall producer USG Corp with Gebr. Knauf AG. In a bench ruling, the Court decided that the hostile-takeover protections in DGCL Section 203 did not apply simply because USG's largest stockholder had dis­cussed possible per-share deal terms with the proposed buyer, as the two never had a meeting of the minds on the point. In addition, in Olenik v. Lodzinski, the court provid­ed further support for its holding in Kahn v. M&F World­wide Corp., as it upheld the structure of the transaction in question, which, among other things, included a majority of the minority vote so that the controlling private equity firm who stood on both sides of the transaction could not force its will on minority stockholders. As such, the court applied the business judgment rule, noting its preference in such situations to not second-guess the decisions of corpo­rate fiduciaries, absent a finding of corporate waste. The court also clarified the ab initio requirement from the MFW decision. Finally, the court continued the line of cases pro­viding that minority stockholders could be considered con­trollers with its decision in Basho Technologies Holdco B, LLC v. Georgetown Basho Investors, LLC. In that matter, the court found that a minority stockholder had used the contractual consent rights granted to it as a preferred stock investor, together with "hardball" negotiating tactics, to force Basho to the brink of insolvency, which left it with no choice but to accept oppressive financing terms from that stockholder.

The Chancery Court also decided a handful of new apprais­al cases during the quarter. In two, Blueblade Capital Op­portunities, LLC v. Norcraft Companies, Inc. and Solera Holdings, the court rejected the deal price as a measure of fair value based on the respective pre-transaction processes and deal terms. Both cases showed the court's willingness to get into the weeds on these matters, particularly if it believes the negotiation among the parties has been limited by process, terms or otherwise.

The Delaware Supreme Court provided further guidance on how to apply the Corwin standard to M&A transac­tions—notably, that disclosures to stockholders must faith­fully reflect all material facts in order for the parties to benefit from the application of the more director-favorable business judgment rule. In Morrison v. Berry, the Supreme Court reversed a dismissal by the Chancery Court, provid­ing a cautionary reminder that "partial and elliptical dis­closures" can leave stockholders less than fully informed in a transaction, and if so, a board can lose the benefits of the business judgment rule.

Outside of the courts, we did see some noteworthy new law relating to M&A and corporate goverance. The third quarter of 2018 saw California adopt a minimum quota for women on boards of directors of public companies headquartered in the state. The California law is like no other in the nation, as it requires companies with at least five board members to have at least two female board members by 2021 (and more, in the case of larger boards). Whether the law will withstand constitutional challenges and whether or not other states will follow suit remains to be seen.

We also saw enactment of landmark CFIUS legislation. With the Foreign Investment Risk Review Modernization Act, the Committee on Foreign Investment in the United States has been empowered with an added level of scru­tiny and influence in M&A transactions involving foreign investments in U.S. businesses. The new law expands the scope of transactions potentially subject to CFIUS review, provides CFIUS the ability to suspend transactions mid-re­view and, for the first time, requires mandatory filing for certain transactions. Not to be outdone by the U.S., the UK government also published details of its proposed new regime for the scrutiny of foreign investment that may have national security implications. Those proposals are contained in the National Security and Investment White Paper, and a draft Statutory Statement of Policy Intent, which expand on recent reforms that gave the U.K. govern­ment greater powers to screen mergers on national security grounds, where the target is involved in the production of military or dual-use technologies or certain other types of advanced technologies.

Finally, in deal practice, we note that the "MeToo" move­ment has started to impact purchase agreements—buyers are not just focused on diligence for such issues, but have begun to request specific representations and warranties to provide more adequate disclosure around sexual harass­ment claims or similar matters raised against or by com­pany employees.

Overall, the third quarter of 2018 (and the day after) brought interesting developments across the M&A world. That, plus a heavy flow of continued deal activity (some of which we note on the final pages of this report), made for another ac­tive quarter. As always, we encourage you to reach out to any member of your Ropes team (or the Ropes Recap team) with any questions regarding the contents of this Ropes Re­cap or any other M&A legal developments that interest you. We look forward to continuing to bring you M&A news, trends and legal developments in the future.

Thank you.

Ropes Recap Editors

To view the full article, please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions