This piece by Law360, “Appraisal Actions May Be The Next Frontier For PE Shops,” discusses a range of reactions to the closely watched rulings in the DFC Global and Dell appraisal cases currently on appeal before the Delaware Supreme Court. Some commentators see the appraisal strategy becoming more attractive to private equity funds as the valuation methodologies used by the Chancery Court become more refined and formulaic, while critics write off the increase in appraisal activity as a natural outgrowth of the diminished appeal of fiduciary duty litigation.
This Bloomberg BNA piece, “Dealmakers Eye Safeguards Amid Rising Valuation Challenges,” observes the spike in appraisal activity and queries whether M&A buyers are taking added steps to address appraisal risk.
The ABA Business Law Section, Spring Meeting, shared this presentation, laying out some useful information regarding the Depository Trust & Clearing Corporation. The material is of particular relevance to those interested in appraisal rights; the continuous holder requirement – which requires appraisal seekers to have continuously held their stock from the time of making their appraisal demand through the deal closing – requires a petitioner to overcome procedural hurdles in order to exercise appraisal and make sure their claim is not subject to challenge. This presentation gives an overview of some of the recent case law, including the Dell matter, for those interested in the nuts and bolts of exercising appraisal rights.
Conyers Dill & Pearman, a firm with offices in, among other places, Bermuda and the Cayman Islands, prepared this write-up on the use of appraisal rights in the Cayman Islands. Like Delaware, the Cayman Islands have seen an uptick in shareholders exercising their appraisal rights to seek fair value for their shares. A prior article by Conyers Dill provides extensive background on the availability of appraisal rights in the Cayman Islands; the firm has also written on the principles considered by Cayman courts in determining fair value. While Delaware is the focus of appraisal activity in the United States, there are appraisal issues and opportunities in other states and around the world.
** We thank Bernadette Carey of Conyers Dill for corresponding with us about that firm’s knowledge of Cayman appraisal rights. Lowenstein Sandler LLP does not practice in the Cayman Islands.
Blockchain: The idea of distributed ledger technology – usually associated with “cryptocurrency” like bitcoin – may be coming to the world of appraisal rights in the near future. As reported by Bloomberg BNA, Delaware’s legislature is considering facilitating the use of blockchain technology with respect to share ownership. As recent cases have shown, pursuit of appraisal rights is critically related to an understanding of the actual system of share ownership involving the Depository Trust & Clearing Corporation and intermediaries in the U.S., a process that, for the appraisal claimant, can be fraught with peril. Blockchain is one potential solution to simplify the record keeping of who owns what shares and how they own them. The relevant proposed legislation is available here.