This article by Stout Risius Ross surveys all appraisal rulings since 2010 and identifies certain key metrics in those decisions, including the court’s valuation methodology, whether an auction or go-shop was included in the M&A transaction, and the mean and median premium over merger price resulting from those awards.
Last month we wrote about the Lender Processing case, which ultimately awarded deal price and contained an instructive survey of recent appraisal law. For another view of this case, see the January 11, 2017 post on Harvard Corporate Governance.
We have posted before about the amicus brief that a collection of law professors has asked to put before the Delaware Supreme Court as it hears the DFC Global appeal. On Friday, the Supreme Court granted their request and will consider their submission advocating that the chancery courts should defer to the merger price when reached as a result of a robust, pristine M&A auction. This ruling was made despite the opposition voiced by the DFC Global stockholders defending the lower court’s decision to award them a premium to the merger price. The Court found that the professors may be able to provide it with some “unique supplemental assistance” in this case, which involved a question of “general public importance.”
In a new post by the Harvard Law School Forum on Corporate Governance and Financial Regulation, Professor Albert Choi (Virginia Law School) and Professor Eric Talley (Columbia Law School) present their new working paper, which asks how best to measure “fair value” in an appraisal proceeding.
Applying principles of game theory and auction design, the authors show that as a general matter, setting the appraised value at merger price (using a so-called MP rule) “depress both acquisition prices and target shareholders’ expected welfare relative to both an optimal appraisal rule and several other plausible alternatives.” The authors argue that the MP rule is the functional equivalent of nullifying the appraisal right altogether.
Law360 has provided some Delaware Chancery Cases to Watch in 2017 [$$$], highlighting the DFC Global case, which we’ve blogged about previously. The Law360 commentary, like ours, notes that this will be an opportunity for the Delaware Supreme Court to weigh in on the factors relevant to appraisal and will be a closely watched decision.