Appraisal is Pro-Investor

Does increased appraisal risk have an effect on manager behavior?  Recent research (unpublished) suggests it does.

In this paper (earlier version), the author examines target manager disclosure behavior before and after the significant Transkaryotic decision.  Reviewing mergers before and after that merger, the returns, abnormal returns, and associated disclosures by target management, the author concludes

Per JDSupra, the Yukon Court of Appeal overturned a decision applying a discounted cash flow analysis to a Canadian appraisal proceeding, holding that the trial court failed to give proper consideration of merger price. Citing factors that would be familiar to a US practitioner, including the deal process, the existence (or lack thereof) of

The Principal Funds, a provider of a suite of investment products including ETFs and mutual funds, recommends voting for appraisal rights in its proxy guidelines. When it comes to mergers themselves, the Principal Funds take a case-by-case approach, considering a litany of factors, including “(1) prospects of the combined companies; (2) anticipated financial and

Proxy firm Institutional Shareholder Services (ISS) offers a number of proxy guidelines for specific funds, kinds of funds and separate interest groups. We recently wrote about ISS’s sustainability guidelines, which recommend voting in favor of appraisal rights. ISS also provides recommendations for Catholic funds and related entities. Per ISS: “Catholic Advisory Services Recommendation:

In a recent appraisal decision, Delaware Vice Chancellor Slights III awarded investors a 12% premium above deal price, fully adopting the discounted cash flow analysis Petitioners tendered, except for one minor adjustment. The case involved a three-way business combination of a privately held target turned public without minority shareholder approval. The court eschewed the use

Proxy firm Institutional Shareholder Services’ Sustainability Proxy Voting Guidelines – 2020 Policy Recommendations are public, and include a recommendation that shareholders vote in favor of appraisal rights when they are on the ballot.

ISS observes that some investment funds are taking a view towards incorporating various issues into their voting behavior – including corporate governance,

According to this Financial Times report [$$$], shareholder activist campaigns targeted at M&A activity were at record levels in 2019, comprising almost half of all activist activity in 2019.

M&A activism can take many forms, but perhaps of most interest to those also interested in appraisal is activism that focuses on already announced deals.  A