In reviewing current “hot topics” in M&A, law firm Sullivan and Cromwell writes this about the current state of appraisal, given the continued developments from multiple major appraisal cases in the past couple years:
“Post-Aruba Appraisal Landscape: Following the Delaware Supreme Court’s decision in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (April 17, 2019), in which the Supreme Court reversed the Chancery Court’s finding that unaffected market price was fair value in favor of the deal price less synergies, there have been three appraisal decisions issued: (1) In re Appraisal of Jarden Corporation (July 19, 2019); (2) In re Appraisal of Columbia Pipeline Group, Inc. (August 12, 2019); and (3) In re Stillwater Mining Company (August 23, 2019). While the Delaware judiciary has not expressly established a presumption that the deal price is fair value, it has consistently, like in Columbia and Stillwater, relied on the deal price to determine fair value when the sale process has objective indicia of deal-price fairness (e.g., (1) arm’s-length transactions with third parties, (2) absence of board conflicts, (3) due diligence by the acquiror involving confidential target information, (4) multiple price increases extracted by the target company and (5) lack of alternative bidders (whether evidenced through active or passive market checks)). However, Jarden demonstrates that, in cases where there is a deficient sales process, unaffected market price may still provide a reliable indicator of fair value, and a finding that the deal price is unreliable does not necessarily mean that the fair value will be greater than the deal price. Columbia and Stillwater also highlight that a respondent must prove synergies to reduce fair value below the deal price and that traditional valuation analyses may not receive much weight, particularly if there is a legitimate debate among competing experts concerning the inputs.”
*Lowenstein Sandler LLP acts for petitioners in a matter discussed in this quotation.