USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
11.4 Independent Outside Advice A target company board will generally engage external legal and financial advisers when considering poten- tial business transactions. Directors may rely upon such outside advisers, and good-faith consideration of their advice is important for fulfilling the directors’ fiduciary duties. Target company boards generally also request a “fairness opinion” from financial advis- ers on whether the proposed consideration is fair from a financial standpoint.
• federal and state (largely Delaware) court deci- sions limit the use of “disclosure only” settlements whereby plaintiffs seek to obtain additional infor- mation and legal fees; and • Delaware courts, and the Delaware legislature, have expanded and/or clarified circumstances for the application of the business judgement rule. Under Delaware law, shareholders who do not vote for a cash merger are generally entitled to an appraisal by the Delaware Court of Chancery of the fair value of the shareholders’ shares. While appraisal actions have historically been common, recent decisions by the Delaware Supreme Court give significant weight to market-based indicators of value (eg, the target com- pany’s stock price or the deal price) in the absence of showing that the target’s stock trades inefficiently or that there was no robust sale process.
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