Delaware Decision Provides Further Lessons for Directors, Activist Investors, and Financial Advisors in Negotiating Mergers
October 17, 2018
The Delaware Court of Chancery yesterday found an activist investor aided and abetted a target board’s breaches of fiduciary duty, most significantly by concealing from the target board (and from the stockholders who were asked to tender into the transaction) material facts bearing on a potential conflict of interest between the activist investor and the target’s remaining stockholders.
See In re PLX Technology Inc. S’holders Litig., C.A. No. 9880-VCL (Del. Ch. Oct. 16, 2018). This decision serves as a reminder of the importance of full disclosure of material facts in cases involving potential conflicts (and not just of the potential conflicts themselves, but also of the ways in which such potential conflicts manifest themselves)—both at the board level and at the stockholder level. As this decision also demonstrates, in addition to the more familiar allegations of financial advisor conflicts, the court may find potential conflicts exist where an activist investor in the target with short-term interests that could be perceived to diverge from the interests of other stockholders is involved in merger negotiations.
Click here, to continue reading on the Cleary M&A and Corporate Governance Watch blog.