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M&A Law: The Lawyer's Role; Recent Delaware Developments

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M&A Law: The Lawyer's Role; Recent Delaware Developments

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A two-hour presentation on the role of the lawyer in the M&A team, the place of legal due diligence in the overall buyer side's due diligence process, and a review of recent Delaware M&A legal developments. I'm available to give it to your law firm, company, or group.

A two-hour presentation on the role of the lawyer in the M&A team, the place of legal due diligence in the overall buyer side's due diligence process, and a review of recent Delaware M&A legal developments. I'm available to give it to your law firm, company, or group.

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M&A Law: The Lawyer's Role; Recent Delaware Developments

  1. 1. UCLA Anderson Executive Education present: MERGERS & ACQUISITIONS: DUE DILIGENCE AND LEGAL ISSUES Professor Stephen M. Bainbridge UCLA School of Law Thursday, April 14, 2016
  2. 2. OVERVIEW 1. Lawyer’s role in M&A teams 2. Due diligence 3. Converting legal due diligence into shareholder value 2© S T E P H E N M . B A I N B R I D G E
  3. 3. © S T E P H E N M . B A I N B R I D G E 3 Part 1 LAWYER’S ROLE
  4. 4. SELL-SIDE » Assisting the seller in pre-sale corporate "housekeeping," which involves cleaning up corporate records, developing strategies for dealing with dissident shareholders, and shoring up third-party contracts » Working with the investment banker in helping evaluate competing offers » Assisting in the negotiation and preparation of the letter of intent and confidentiality agreements » Negotiating definitive purchase agreements with buyer's counsel © S T E P H E N M . B A I N B R I D G E 4
  5. 5. SELL-SIDE » A pre-sale legal audit should be conducted in order to assess the state of the company: » Identify and predict the problems that will be raised by the buyer and its counsel. » Should include corporate housekeeping and administrative matters, the status of the seller's intellectual property and key contracts (including issues regarding their assignability, regulatory issues, and litigation. © S T E P H E N M . B A I N B R I D G E 5
  6. 6. BUY-SIDE » Conduct legal due diligence » Assisting in the negotiation and preparation of the letter of intent and confidentiality agreements » Negotiating definitive purchase agreements with seller’s counsel » Working with the buyer in connection with post-closing matters © S T E P H E N M . B A I N B R I D G E 6
  7. 7. WHAT NON-LEGAL ISSUES SHOULD MY COUNSEL RAISE WITH ME? » What happens if XYZ happens? » Loss of key customers » Loss of key suppliers » Loss of key employees (including the seller) » Litigation » What happens if XYZ does not happen? » Approval of the transaction » Approval needed for the business
  8. 8. WHAT NON-LEGAL ISSUES SHOULD MY COUNSEL RAISE WITH ME? » Rep and warranty insurance » Insurance impact » Employment agreements/policies » Benefit plans
  9. 9. WHAT NON-LEGAL ISSUES SHOULD MY COUNSEL RAISE WITH ME? » IT » How does this effect your loan covenants? » SEC reporting requirements? » Third party shareholder representative » Escrow provider
  10. 10. © S T E P H E N M . B A I N B R I D G E 1 0 Part 2 DUE DILIGENCE
  11. 11. FORMS OF DUE DILIGENCE © S T E P H E N M . B A I N B R I D G E 1 1
  12. 12. WHY LEGAL DUE DILIGENCE? » Helps buyer understand target better. » May aid in target valuation by identifying risks associated with lawsuits, insurance policies, employee benefit and labor arrangements, potential environmental claims, intellectual property, etc… » Assists counsel in drafting acquisition documents, especially legal representations and warranties, covenants, and conditions. © S T E P H E N M . B A I N B R I D G E 1 2
  13. 13. SCOPE CONSIDERATIONS » Deal structure. » Industry. » Global presence. » Competition. » Access to target company: The target company often restricts access to the management of the business to only those necessary to facilitate the due diligence review to limit interference and preserve the confidentiality of the merger discussions. » Cost: The buyer can limit the scope of the due diligence investigation to reduce its expenses. Sometimes, a buyer conducts its investigation in stages and only increases spending when the likelihood of consummation increases. » Time constraints: It is usually in both parties' interest to quickly conclude the review and execute the definitive merger agreement. © S T E P H E N M . B A I N B R I D G E 1 3
  14. 14. THE DATA ROOM » Target will provide access to key documents in a data room; increasingly, located in the cloud. » Organizational documents » All material contracts » All documents relating to pending litigation and litigation recently completed » Major documents relating to labor and employee benefits matters » Tax filings. » Takeover defenses. » Press releases. » SEC filings. © S T E P H E N M . B A I N B R I D G E 1 4
  15. 15. PERSONNEL INTERVIEWS » Identify the right people to be interviewed: Rights and PermissionsContracts Department MIS/Technology Officer Senior Executives Inside & Outside Counsel Charged with web site development/sales/subscriptions? CFO (liens, security interest) Licensing Litigation Company Policy People
  16. 16. ORGANIC DOCUMENTS » Ensure that all organic documents are available and free of concerns, including: » Certificate of incorporation, good standing certificates, bylaws, minutes of shareholder and director meetings, shareholder agreements, and any outstanding warrants and option agreements. © S T E P H E N M . B A I N B R I D G E 1 6
  17. 17. MAJOR CONTRACTS » Review all major distributor, supplier and customer agreements, all confidentiality and non-compete agreements, all intellectual property agreements (licenses into and out of the company), and all equipment leases. » Is a change of control an event of default in any? © S T E P H E N M . B A I N B R I D G E 1 7
  18. 18. REAL ESTATE » Review all real estate leases entered into by the target company (whether as a tenant or a landlord), purchase agreements, surveys (if a long term lease or fee owned), title insurance policies (if fee owned). » Ascertain whether any consents are needed for the contemplated business sale (or merger) transaction, how much the rent liabilities are, whether there are sufficient term(s) remaining on the lease(s). © S T E P H E N M . B A I N B R I D G E 1 8
  19. 19. CAPITAL STRUCTURE/FINANCING » Is all outstanding stock fully paid and non-assessable? » Is the company in compliance with all bond indentures? » Review all UCC liens for defaults or other concerns. » Is company current on SEC filings? » SOX compliance © S T E P H E N M . B A I N B R I D G E 1 9
  20. 20. TECHNOLOGY/IP » Identify target’s IP » Domestic and foreign patents (and patents pending) » Registered and common law trademarks and service marks » Copyrighted products and materials » Trade Secrets © S T E P H E N M . B A I N B R I D G E 2 0
  21. 21. TECHNOLOGY/IP » Legal assessment: » Has the company taken appropriate steps to protect its intellectual property (including confidentiality and invention assignment agreements with current and former employees and consultants)? » Is the company infringing on (or has the company infringed on) the intellectual property rights of any third party, and are any third parties infringing on (or have third parties infringed on) the company’s intellectual property rights? » Is the company involved in any intellectual property litigation or other disputes (patent litigation can be very expensive), or received any offers to license or demand letters from third parties? » What indemnities has the company provided to (or obtained from) third parties with respect to possible intellectual property disputes or problems? © S T E P H E N M . B A I N B R I D G E 2 1
  22. 22. DUE DILIGENCE PROCESS OVERVIEW A- Preparation: Research, understand, value and help the company avoid or minimize risks B- Focus: (1)- contingent liabilities (2)- material contracts of the target (3)- employee (4)- restrictions on the conduct of target business C-Data Collection: -gathering data, -interviews D-Assessing Data (1)- Check all relevant regulatory filings documents, (2)-Check press reports, (3)-Check company and affiliates websites, (4)- talk or interview former employee, directors,… (5) watch everything about the company E-Data Analysis techniques: coding, identify pattern for comparisons purpose, codes can be based on: themes, ideas, concepts, terms, phrases or keywords F-Data Reporting: very well written, organized and detailed documents: memo style, working paper style, book style, news articles style or teaching materials style. 2 2
  23. 23. © S T E P H E N M . B A I N B R I D G E 2 3 Part 3 CONVERT ING LEGAL DUE DILIGENC E INTO SHAREHOLDER VALUE
  24. 24. THE IMPERATIVE » “In a universe where litigation resulting from public company mergers is ubiquitous, it is likely that the Board's awareness of its fiduciary duties would have provided substantial leverage on the Special Committee and the Board to pursue the opportunities that the market … provided” » In re Quest Software Inc. Shareholders Litig., No. CV 7357-VCG, 2013 WL 5978900, at *8 (Del. Ch. Nov. 12, 2013) © S T E P H E N M . B A I N B R I D G E 2 4
  25. 25. THE IMPERATIVE » “Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%.” » Most settled, with many involving shareholders getting only additional disclosures and plaintiff lawyers getting fees. » Jill E. Fisch et. al., Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and A Proposal for Reform, 93 Tex. L. Rev. 557 (2015) © S T E P H E N M . B A I N B R I D G E 2 5
  26. 26. DIGRESSION ON TRULIA » In re Trulia Inc. Stockholder Litig., C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016): » Disclosure-only settlements generally not fair or reasonable » The additional disclosures must be “plainly material” » Approved settlements will only release Delaware fiduciary duty claims, not all claims © S T E P H E N M . B A I N B R I D G E 2 6
  27. 27. DIGRESSION ON TRULIA » Likely effects: » More extensive books and records requests (DGCL § 220) » Filing suits in other jurisdictions » Consider exclusive forum bylaws or charter provisions per DGCL § 115 » More Delaware filed cases will go to trial » But (maybe) fewer cases will be filed © S T E P H E N M . B A I N B R I D G E 2 7
  28. 28. Standards of Review Chen v. Howard Anderson (Del. 2014) BJR BoD were disinterested and independent E.g., Arms-length mergers with no deal protection devices Enhanced Scrutiny BoD faced “potential conflicts of interest because of the decisional dynamics present in particular recurring and recognizable situation” E.g., Takeover defenses, sales of control, deal protection devices Unocal {Blasius) Revlon Fairness BOD confronted actual conflicts of interest such that the directors making the decision did not comprise a disinterested and independent board majority E.g., Freeze-outs and other COI transactions
  29. 29. CURRENT ISSUES 1. Becoming informed before a sale 2. Appraisal valuation 3. Controlling shareholder liability 4. Financial advisor conflicts of interest © S T E P H E N M . B A I N B R I D G E 2 9
  30. 30. BOARD OBLIGATION TO BE INFORMED » “The business judgment rule “is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.’” -- Smith v. Van Gorkom (Del. 1985). © S T E P H E N M . B A I N B R I D G E 3 0
  31. 31. BOARD OBLIGATION TO BE INFORMED » “The business judgment rule “is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.’” -- Smith v. Van Gorkom (Del. 1985). © S T E P H E N M . B A I N B R I D G E 3 1
  32. 32. BOARD OBLIGATION TO BE INFORMED » “… where the directors … make an uninformed business judgment under circumstances constituting gross negligence, that decision would not be protected under the business judgment rule and may give rise to an actionable claim.” -- Lewis v. Honeywell, Inc. (Del. Ch. 1987). © S T E P H E N M . B A I N B R I D G E 3 2
  33. 33. LAWYER’S ROLE » Leo Herzel & Leo Katz, Smith v. Van Gorkom: The Business of Judging Business Judgment, 41 Bus. Law. 1187, 1191 (1986) » Van Gorkom resulted in “greater formalism on the part of the board, as it goes about the business of cultivating an aura of care, diligence, thoroughness, and circumspection,” and this meant “more reliance on and more fees for lawyers, investment bankers, accountants,” and other advisors. » Attorneys explain the Van Gorkom decision itself and its interpretation of “due care.” » Attorneys provide counsel to corporate directors and officers in the construction and maintenance of an acceptable takeover process. » Due diligence and output memo/board briefing key elements S t e p h e n M . B a i n b r i d g e ( c ) 2 0 1 5 3 3
  34. 34. MARKET TEST Revlon TriggeredRevlon Not Triggered Duty of Care (duty to be fully informed) Duty of Loyalty (duty of good faith) Duty of Complete Disclosure (Delaware) Generally, Business Judgment Rule Review General Fiduciary Duties (Care, Loyalty, Disclosure) Duty to seek “the highest value reasonably obtainable for stockholders” Enhanced Scrutiny Duty to “act in a fully informed manner, and in good faith, to obtain the best deal available” S T E P H E N M . B A I N B R I D G E ( C ) 2 0 1 5 3 4
  35. 35. THE BORDERS OF REVLON-LAND » Arnold v. Society for Sav. Bancorp, Inc., 650 A.2d 1270 (Del. 1994) : » The directors of a corporation “have the obligation of acting reasonably to seek the transaction offering the best value reasonably available to the stockholders,” in at least the following three scenarios: » “when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company”; » “where, in response to a bidder’s offer, a target abandons its long-term strategy and seeks an alternative transaction involving the break-up of the company”; or » when approval of a transaction results in a “sale or change of control.” In the latter situation, there is no “sale or change in control” when “‘[c]ontrol of both [companies] remain[s] in a large, fluid, changeable and changing market.’” 3 5
  36. 36. CHANCERY THINKS FORM OF CONSIDERATION MATTERS All stock • No change of control • No Revlon duties Mixed stock (67%) and cash (33%) • No change of control per Santa Fe (Del 1995) • No Revlon duties Mixed stock (50%) and cash (50%) • Change of control per Smurfit-Stone (Del Ch 2011) • Revlon duties All Cash • Change of control per Nymex (Del Ch 2009) dicta • Revlon duties 3 6
  37. 37. REVLON-LAND » “Enhanced Scrutiny” involves: » Judicial determination regarding adequacy of decisionmaking process (including information on which directors based decision) » Judicial examination of the reasonableness of the directors’ action in light of circumstances then existing » No single “blueprint” by which a Board must fulfill its Revlon duties. Board can successfully fulfill Revlon through: » Public “Auction” (publicly announced deal process) » Private Limited “Auction” (approaching a smaller number of bidders confidentially) » One-on-one negotiations + market check » If challenged, directors must be able to prove they were adequately informed and acted reasonably © S T E P H E N M . B A I N B R I D G E 3 7
  38. 38. GO SHOP CLAUSES » A “go-shop” is a provision in a merger agreement that allows a target to solicit interest from potential buyers of the company for a limited period of time (typically between 20-55 days) after signing a definitive agreement with an initial buyer. » The right to solicit includes the ability to exchange confidential information about the target with a potential buyer so long as the potential buyer signs a confidentiality agreement that is substantially on the same terms as the confidentiality agreement signed with the initial buyer. » Once the go-shop period ends, the target typically is subject to the customary “no-shop” prohibitions against soliciting other bidders or engaging in negotiations except in response to an unsolicited offer that could reasonably be expected to lead to a superior transaction. S T E P H E N M . B A I N B R I D G E ( C ) 2 0 1 5 3 8
  39. 39. IMPACT OF GO SHOP CLAUSES » Typically used where target initially negotiates with single bidder rather than conducting an auction » Provides a “market check” on price adequacy » More common where (1) a financial buyer (2) uses all cash financing and (3) the target has low valuation uncertainty » Typically result in significant price improvement even if no competing bidder emerges S T E P H E N M . B A I N B R I D G E ( C ) 2 0 1 5 3 9
  40. 40. APPRAISAL » In public company acquisitions, the Delaware courts have generally found that the merger price was the most reliable indicator of fair value. » Growing reluctance by courts to substitute their own calculation of the “fair value” of a target company’s stock, including through a discounted cash flow analysis, for the purchase price derived through arm’s-length negotiations, as long as that price resulted from a thorough, informed and disinterested sales process. © S T E P H E N M . B A I N B R I D G E 4 0
  41. 41. MERLIN PARTNERS LP V. AUTOINFO, INC., NO. 8509-VCN (DEL. CH. APR. 30, 2015) » Plaintiff expert testified shares should be valued at $2.60/share. But court held the $1.05 merger price was a more reliable indicator of fair value because 1. It was the product of an adequate process, 2. The board had been considering a sale even before the company’s larger institutional shareholders began pressuring the board for improved performance 3. The company was “shopped quite a bit” 4. Negotiations with the buyer were conducted at arm’s length by an independent special committee. © S T E P H E N M . B A I N B R I D G E 4 1
  42. 42. IN RE APPRAISAL OF DOLE FOOD COMPANY, INC., NOS. 8703-VCL & 9079-VCL (DEL. CH. AUG. 27, 2015) » Court declined to defer to merger price where: » Dole’s CEO and controlling stockholder, David Murdock, and his “right hand man,” C. Michael Carter, undermined the sales process by depriving the special committee of the ability to negotiate, and stockholders of the right to vote, on a fully informed basis. » Carter intentionally attempted to depress the price of the company’s stock in advance of a going-private proposal and interfered with the special committee by, among other things, providing it with false financial information and misrepresenting that other financial information was not available © S T E P H E N M . B A I N B R I D G E 4 2
  43. 43. WHEN DO YOU HAVE A CONTROLLING SHAREHOLDER? » Calesa Associates, L.P. v. American Capital, Ltd., C.A. No. 10557-VCG. (Del. Ch. 2016): » American Capital, despite owning only 26% of the company’s shares, exercised sufficient influence over the Halt Medical board such that it and certain affiliates could be deemed “controlling stockholders” owing fiduciary duties to other stockholders. © S T E P H E N M . B A I N B R I D G E 4 3
  44. 44. WHEN DO YOU HAVE A CONTROLLING SHAREHOLDER? » Calesa Associates, L.P. v. American Capital, Ltd: » “Control” is a highly fact-specific inquiry that focuses on the stockholder’s actual influence over the board in regard to the transaction at issue » Three of Halt’s then-six directors had been appointed by American (including one of American’s directors and one of its executives), and » A fourth purportedly independent director—a close friend of American’s chairman who co- founded an investment firm that was among American’s largest investors—was appointed at American’s request. © S T E P H E N M . B A I N B R I D G E 4 4
  45. 45. CONTROLLING SHAREHOLDER DEAL SAFE HARBOR » The BJR rather than fairness will be applied when: (1) the controller from the outset conditions the transaction on the approval of both a special committee and a majority of the minority stockholders; (2) the special committee is independent (3) the special committee is empowered to freely select its own advisors and to say no definitively (4) the special committee meets its duty of care in negotiating a fair price (5) the minority vote is informed (6) the minority is not coerced © S T E P H E N M . B A I N B R I D G E 4 5
  46. 46. THE LESSONS OF RURAL/METRO » Delaware Supreme Court held a financial advisor liable for approximately $76 million in damages for aiding and abetting breaches of fiduciary duties by former directors of Rural/Metro in connection with the company’s 2011 sale to a private equity fund » Boards need to address current and historical conflicts prior to engagement » Particularly if financial analyses are presented » Address them in representations, warranties and covenants in engagement letters » Boards should establish processes to remain informed of any current or developing conflicts throughout the transaction and to disclose them to stockholders © S T E P H E N M . B A I N B R I D G E 4 6
  47. 47. © S T E P H E N M . B A I N B R I D G E 4 7

Notes de l'éditeur

  • The goal is to find the bugs before the buyer's counsel discovers them for you (which would be embarrassing as well as costly from a negotiating perspective) and to get as many of the bugs out as possible before the first buyer is considered. For example, now may be the time to resolve any disputes with minority shareholders, complete the registration of copyrights and trademarks, deal with open issues in your stock option plan, or renew or extend your favorable commercial leases.

    It may also be a good time to set the stage for the prompt response of those third parties whose consent may be necessary to close the transaction, such as landlords, bankers, key customers, suppliers, or venture capitalists. In many cases, there are contractual provisions that can prevent an attempted change in control without such consent. For those bugs that can't be exterminated, don't try to hide them under the carpet. Explain the status of any remaining problems to the prospective buyers and negotiate and structure the ultimate deal accordingly.
  • In any significant merger or acquisition, the buyer gathers information about what it is buying before making a commitment. The buyer uses this information to decide whether the proposed acquisition would make a sound commercial investment and to determine the issues relevant to the merger.

    In an extreme case, a buyer can decide to abandon the transaction after performing due diligence, but more commonly (in a negotiated deal) a buyer uses the information to negotiate certain contractual provisions (such as conditions to closing) or to adjust the merger consideration.

    Generally, the representations and warranties do not survive the closing in public mergers and a buyer is not protected against losses through indemnification provisions. As a result, completing a thorough due diligence investigation is of critical importance since the buyer cannot recover losses after closing.

    Because of the SEC's disclosure requirements, a significant amount of information about potential target companies is freely available to the public . Consequently, public company due diligence reviews usually proceed at a much quicker pace than that of a private company.
  • Deal structure. For example, in a reverse triangular merger, anti-assignment clauses pose no concern for the buyer (although change of control clauses are a concern).

    Industry. The industry of the target company can influence what areas of due diligence you concentrate on. For example, acquisition of a pharmaceutical company requires extensive intellectual property due diligence by the buyer.

    Global presence. If the target business has global operations, it is important to assess its compliance with the requirements of the Foreign Corrupt Practices Act of 1977 (see Practice Note, M&A Due Diligence: Assessing Compliance and Corruption Risk).

    Competition. If the buyer and target company compete with each other, they may want to (or be required by antitrust laws) keep certain information confidential (such as, pricing) until after the transaction is consummated (see Box, Competitively Sensitive Information).
  • It is helpful to develop a system for organizing the materials at the outset. A common way to organize materials is to place all due diligence items in folders with labels indicating the name of the document and index reference. Often a paralegal can help with this process.
  • Some information is difficult to learn from just reading documents. The buyer often asks to visit the target company site and talk with members of management. It can be helpful for some members of the legal team to participate in these meetings with management (sometimes called management presentations) to understand the operations of the business.

    For more insight into the target's legal framework and existing issues, buyer's counsel should meet, or hold a teleconference, with the target company's general counsel or other in-house legal staff at the outset of the due diligence review.

    A final meeting or teleconference allows you to ask follow-up questions concerning due diligence materials and to receive complete answers based on your questions.
  • Common issues to consider include:
    Capitalization and equity ownership. Is there a stockholder or group of stockholders that has control of, or a significant stake in, the target company? Are there any subsidiaries? What equity is outstanding? How much equity is authorized? Is there room for further issuances?
    Consent issues. Are any votes or consents required in connection with the transaction? What actions require consent of stockholders or the board of directors?
    Special rights of stockholders. Is there a poison pill? What are the triggering events? What is required to amend the plan or redeem the rights?
    Dividends. What is the dividend policy? Can the board of directors change this policy without a vote?
    Unusual provisions.  Look for any provisions that could impact the transaction or future operation of the target company. For example, you should note if a stockholder is guaranteed representation on the board of directors.
    Minutes of meetings of board of directors and committees of the board. Common issues to consider include:
    Contingent liabilities. Look for any discussions regarding claims against the target company or its management, defaults under agreements, threatened litigation, labor or employment concerns, and investigations involving the target company or its employees.
  • Parties. Who are the parties to the contract?

    Change of control. Is there a change of control provision? Does this transaction constitute a change of control? See Box, Assignment and Change of Control.

    Assignment. Is the contract assignable? Is consent required? How is an assignment defined? Does the transaction structure require an assignment? Does a change of control constitute an assignment? See Box, Assignment and Change of Control.

    Termination. When does the contract terminate? Is there an automatic renewal provision? Can either party terminate without consent? Does a change of control give either party a right to terminate the contract?

    Unusual provisions. Look for any provisions that could impact the transaction or future operation of the target company. Are there any provisions restricting the target company or provide benefits to the other party? For example, you should note a most favored nation provision, non-compete provision or exclusivity provision.
  • Contingent obligations. It is important to note any contingent obligations such as guarantees. It is also important to note if any debt is guaranteed by third parties (for example, a parent company guaranty).

    Restrictive covenants. Look for any restrictive covenants impacting the transaction or future operation of the target company.

    Sarbanes-Oxley compliance. Consider:
    Certifications. What is the process for the CEO and CFO certifications?
    Control procedures. What are the internal control and disclosure control procedures?
    Auditor independence. How is auditor independence established? Are there any non-audit services provided by the company's independent auditors?
    Committees. What is the composition for the various committees (audit, compensation, and nominating)? Are the charters consistent with the Sarbanes-Oxley requirements?
  • Focus:
    (1)- contingent liabilities (pending litigation, environmental unresolved cases or other problems
    (2)-material contracts of the target (contingent contracts)
    (3)-employee issues (union contracts, executive compensation contracts,…)
    (4)- restrictions on the conduct of target business (Div’d…)
  • 2015 amendments to the DGCL added new Section 115 to the DGCL authorizing the certificate of incorporation or bylaws of a Delaware corporation to include a forum selection clause requiring that lawsuits asserting “internal corporate claims,” including derivative actions, be brought solely and exclusively in the Delaware courts (including the federal court). Internal corporate claims are claims based on a violation of a duty by a current or former director or officer or stockholder in such capacity, and other claims as to which the DGCL confers jurisdiction upon the Delaware Court of Chancery. 
  • QVC-Paramount and Barkan line of cases makes clear that an auction is not necessary to satisfy duty to be informed
    But deal protection measures adopted without a market test must not unduly inhibit the ability of the board of a target company to negotiate with other potential bidders to obtain the highest possible value for the target’s stock

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