USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang, Gregory Gewirtz and Vinita Sithapathy, Linklaters
10.3 “Broken-Deal” Disputes Following the COVID-19 pandemic, target compa - nies continue to insist on certain exceptions to inter - im operating covenants that allow them latitude to respond appropriately to a changed business environ - ment between signing and closing (see 6.7 Types of Deal Security Measures ) and carveouts for pandemic effects in the definition of “material adverse change”.
• federal and state (largely Delaware) court decisions limiting the use of “disclosure only” settlements whereby plaintiffs seek to obtain additional infor - mation and legal fees; and • Delaware courts’ continued expansion of steps to be taken to provide for application of the business judgement rule in an M&A transaction, making it easier for the target company to win dismissal before plaintiffs seek discovery. Potential litigants have continued and are expected to continue to look for alternative paths in disputing M&A transactions. Under Delaware law, stockholders who do not vote in favour of a cash merger are generally entitled to an appraisal by the Delaware Court of Chancery of the fair value of the stockholder’s shares. No appraisal rights are available if the merger consideration con - sists solely of shares of US-listed stock. While appraisal actions have historically been com - mon, recent decisions by the Delaware Supreme Court give significant weight to market-based indica - tors of value (eg, the target company’s stock price or the transaction price) in the absence of showing that the target’s stock trades inefficiently or that there was Litigation is usually initiated shortly (typically a matter of days) after the transaction is publicly announced. The timing is mainly driven by: • lawyers wanting to be first to file and therefore being designated as “lead counsel” for sharehold - ers challenging a transaction (as a class) – how - ever, courts are increasingly appointing “lead counsel” based on the party best positioned to be the shareholder class representative; and • dissenting shareholders having more negotiat - ing power prior to closing of the transaction, and a common route is for them to ask for a court to enjoin the transaction. no robust sale process. 10.2 Stage of Deal
11. Activism 11.1 Shareholder Activism
Shareholder activism continued to be an important market force in 2025 and Q1 2026, with the majority of campaigns occurring in the USA. Certain sectors – including technology, industrials, healthcare, financial institutions, consumer, real estate, and communica - tions and media – have seen a high concentration of activist activity in comparison to other sectors. 11.2 Aims of Activists While M&A activism has been the primary focus of activism campaigns, especially in the second half of 2025, as activists increasingly sought to cause pub - lic companies to put themselves or discrete business divisions up for sale in response to perceived under - performance, in Q1 2026 activists shifted their focus towards board composition change and strategic and operational demands. 11.3 Interference With Completion With increased scrutiny on companies’ M&A strate - gies, activists have continued to launch campaigns on pending transactions with the aim of potentially recutting deals, either with respect to the purchase price or other transaction terms.
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