February 2017

Professor Guhan Subramanian of the Harvard Business School, who was one of the Dell stockholders’ experts in the Dell appraisal case focused on the M&A deal process, has developed an ostensive “middle ground” between the competing approaches advanced by the respective amicus briefs filed by some two dozen law and economics professors in the DFC Global appeal.

In his February 6, 2017 essay, “Using the Deal Price for Determining ‘Fair Value’ in Appraisal Proceedings,” Professor Subramanian has proposed that courts adopt a presumption that the merger price represents fair value in an appraisal proceeding where the deal process involved “an adequate market canvass, meaningful price discovery, and an arms-length negotiation.”  And where the deal process lacks these features, he believes that deal price should receive no weight whatsoever.  His suggested “synthesizing principle” is a response to what he believes to be an increase in perceived appraisal risk since the Dell appraisal ruling in May 2016.

Further to our posts about the DFC Global appeal, today the Delaware Supreme Court granted the February 3 motion by the Law & Economics Professors arguing against the adoption of a presumption requiring chancellors to defer to merger price in all M&A deals resulting from an apparently robust auction process.  The Supreme Court is now prepared to consider the competing amici briefs filed by both groups of academics who are respectively supporting the opposing parties in the case; in an earlier post today we shared this summary and assessment of the arguments in those competing amici briefs.

Further to our recent post about the newest amicus brief offered up to the Delaware Supreme Court — arguing against the adoption of a merger price rule in appraisal cases — the Business Law Prof Blog posted this balanced assessment of the competing amici  briefs and highlighted their key takeaways.  Quoting in turn to the Chancery Daily newsletter, the post thus characterizes the amicus matchup: “By WWE standards it may be a cage match of flyweight proportions, but by Delaware corporate law standards, a can of cerebral whoopass is now deemed open.”

Further to our prior posts on DFC Global’s appeal to the Delaware Supreme Court, a new group of law and economics professors moved the Court on Friday to consider their brief rebutting the amicus brief previously filed in support of DFC Global’s appeal; the prior brief argued for instituting a new rule requiring deference to the merger price in appraisal cases where the court is satisfied that a sufficiently robust M&A auction process took place.  In the February 3 filing, the new group of law and economics professors asked the Supreme Court to allow them to file their brief supporting affirmation of the trial court’s decision awarding stockholders an appraised value at a premium above the merger price.  The new filing argues that deference to a merger price rule in appraisal cases is unwarranted, inefficient, and contrary to the appraisal statute itself and the Delaware case law, regardless of how carefully crafted the preconditions for such a rule may be.

 

** This law firm was counsel of record on the brief discussed in this post.