In recent times, the Delaware Court of Chancery, backed by the state Supreme Court, has presented decisions indicating not all hope is lost for corporate defendants subjected to the entire fairness standard. This reassurance comes against the backdrop of shareholder contestations of M&A transactions.
Over an 18-month span, two Chancery cases have charted a parallel course. In both instances, entire fairness was applied where a party involved was connected to companies on either side of a deal. Despite these cases moving beyond the dismissal stage to trial, the court ruled that the acquiring corporation’s agreement on purchase price and the conflicted party’s role in negotiation didn’t skew the deal to an extent warranting an overturn. By summer, the Supreme Court concurred with this position.
Historically, it’s been unusual for a defendant to emerge victorious once the stringent entire fairness has been invoked as the review standard in a Chancery case. However, recent decisions imply that the tides may be changing. Certainly, this development could influence the way corporate M&A deals are negotiated, structured, and defended in court, as it alleviates the pressure to achieve perfection in these transactions.
Read more about this important shift in M&A fairness standards in the original article on Law.com, “What’s Fair Enough Is Fair: Entire Fairness Decisions Show M&A Perfection Not Required“.