Law Commons^™

The End Of Remedies?, Joshua Shapiro

Emory Corporate Governance and Accountability Review

No abstract provided.

The Market For Corporate Criminals, Andrew K. Jennings

Faculty Articles

This Article identifies problems and opportunities at the intersection of mergers and acquisitions (M&A) and corporate crime and compliance. In M&A, criminal successor liability is of particular importance, because it is quantitatively less predictable and qualitatively more threatening to buyers than successor liability in tort or contract. Private successor liability requires a buyer to bear bounded economic costs, which can in turn be reallocated to sellers via the contracting process. Criminal successor liability, however, threatens a buyer with non-indemnifiable and potentially ruinous punishment for another firm’s wrongful acts.

This threat may inhibit the marketability of businesses that have criminal exposure, …

Deal Protection Devices, Albert H. Choi

Articles

In mergers and acquisitions transactions, a buyer and a seller will often agree to contractual mechanisms (deal protection devices) to deter third parties from jumping the deal and to compensate a disappointed buyer. With the help of auction theory, this Article analyzes various deal protection devices, while focusing on the two most commonly used mechanisms: match rights and target termination fees. A match right gives the buyer a right to “match” a third party’s offer so as to prevent the third party from snatching the target away, while a termination fee compensates the buyer when a third party acquires the …

Deal Breakage In Domestic And Cross-Border Mergers, Morgan Ricks

Vanderbilt Law School Faculty Publications

This Article presents a newly constructed mergers and acquisitions (M&A) data set that can support detailed analysis of deal outcomes, including deal breakage. The main novelty of the data set is a detailed classification scheme for characterizing deal outcomes, using information drawn from public announcements and news reports. The data set also includes a number of variables, hand gathered from press releases and merger agreements, that are unavailable in existing data sets in reliable form, or at all. The data set consists of all definitive, signed M&A transactions involving US public company targets with a deal value of at least …

Behavioural Economics And The Non-Frustration Rule: Accounting For Bias, Matthew Cole

The Journal of Business, Entrepreneurship & the Law

The purpose of this paper is to argue how reforming the UK takeover and merger rules can lead to greater long-term investment by UK firms, while causing commensurate growth in productivity without hindering overseas investment or entrenching inefficient management.

Being True To Trulia: Do Disclosure-Only Settlements In Merger Objection Lawsuits Harm Shareholders?, Eric L. Talley, Giuseppe Dari‐Mattiacci

Faculty Scholarship

A significant debate within mergers and acquisitions law concerns the explosive popularity of the “merger objection lawsuit” (MOL), a shareholder action seeking to enjoin an announced deal on fiduciary duty grounds. MOLs blossomed during the Financial Crisis, becoming popularly associated with “shareholder shakedowns,” whereby quick-triggered plaintiff attorneys would file against – and then rapidly settle with – acquirers, typically on non-monetary terms containing modest added disclosures in exchange for blanket class releases and attorney fee awards. This practice unleashed a torrent of criticism from lawyers, commentators, academics, and (ultimately) judges, culminating in a doctrinal shift in Delaware law in the …

Corporate Law Federalism In Historical Context: Comparing Canada And The United States, Camden Hutchison

All Faculty Publications

Although American and Canadian corporate law share many similarities, they are also marked by important institutional differences. Among the most notable are the differing roles of federal versus state/provincial policymaking in the two countries: While American corporate law has been deeply influenced by jurisdictional competition among the states, Canadian law has instead been shaped by federal legislative activity, as seen today in the standardizing influence of the Canada Business Corporations Act. These different institutional histories have led to distinct evolutionary paths, with important substantive consequences for contemporary corporate law. Despite considerable academic attention to the subject of corporate law federalism, …

Perfectly Frank: A Reflection On Quality Lawyering In Honor Of R. Franklin Balotti, Leo E. Strine Jr., James J. Hanks Jr., John F. Olson, A. Gilchrist Sparks, E. Norman Veasey, Gregory P. Williams

All Faculty Scholarship

This essay honoring the late R. Franklin Balotti focuses upon certain of the key attributes necessary to practice business law effectively and ethically. Among these attributes are a strong work ethic, the integrity to stand behind your own advice and candidly admit when things do not go according to plan, empathy for how others will view your client’s actions and the ability to communicate that perception to your client, the confidence to change the pace of a transaction when a slow down or time out is warranted, and the ability to have some fun and laugh (even at yourself). Perhaps …

The Battle Over Corporate Bylaws, Ariel Beverly

Loyola of Los Angeles Law Review

No abstract provided.

Subchapter C Reform Of Mergers And Acquisitions After General Utilities: Now What Is Congress Waiting For?, John R. Mcgowan

Akron Law Review

One of the latest and most comprehensive studies in this area was released on May 20, 1985 as the final report of the Senate Finance Committee.' This proposal, called the "Subchapter C Revision Act of 1985," represents perhaps the largest examination of the fundamental rules in the Internal Revenue Code relating to the Federal income taxation of corporations and their investors. In this study, numerous proposals were very favorably received, among them were the proposals covering mergers and acquisitions (M & A). For example, the Treasury Department stated: "[the acquisitions] proposals have substantial merit in that they provide greater consistency …

How "Bad Law, Bad Economics And Bad Policy" Positively Shaped Corporate Behavior, Megan Wischmeier Shaner

Akron Law Review

This article begins by briefly discussing the factual background of the Omnicare decision and the majority’s opinion. Second, this article analyzes the criticism that followed, which generally falls into two broad categories: the doctrinal shortcomings in the majority’s reasoning and the negative practical implications of banning precommitment strategies. Third, this article briefly explores whether the concerns about Omnicare’s impact on merger and acquisition activity came to fruition in the ten years since the decision was issued, concluding that many did not. This article also reviews post-Omnicare case law noting that subsequent decisions of the Delaware Court of Chancery addressing Omnicare-based …

Think Like A Businessperson: Using Business School Cases To Create Strategic Corporate Lawyers​., Alicia J. Davis

Articles

For the past twenty-five years, my academic and professional pursuits have straddled the line between business and law. I majored in business administration in college and then worked as an analyst in the Corporate Finance department at a bulge bracket Wall Street firm. After completing a JD/MBA, I returned to investment banking with a focus on middle-market mergers and acquisitions (M&A) and subsequently practiced law with a focus on private equity and M&A. Finally, in 2004, I found my current home as a corporate law professor. In my courses, which include Mergers & Acquisitions, Enterprise Organization, and Investor Protection, I …

Sandbagging: Default Rules And Acquisition Agreements, Charles K. Whitehead

Charles K Whitehead

In the M&A world, a buyer "sandbags" a seller when, knowing the seller has materially breached a warranty, it closes the deal and then asserts a post-closing claim. Traditionally, the buyer must have relied on the warranty, without knowledge of the breach, in order to prevail. The modern trend, with some exceptions, permits the buyer to sue without regard to knowledge. Parties, in both cases, can contract around the default rule--so that the default rule should affect how acquisition agreements are structured. Yet, a survey of publicly available deals, from July 2007 to June 2011, reveals that--regardless of default rule--roughly …

Trending@Rwu Law: Professor Carl Bogus's Post: When Corporations Grow Too Powerful: Reviving An Old Debate, Carl Bogus

Law School Blogs

No abstract provided.

Think Like A Businessperson: Using Business School Cases To Create Strategic Corporate Lawyers, Alicia J. Davis

Alicia Davis

No abstract provided.

Confronting The Peppercorn Settlement In Merger Litigation: An Empirical Analysis And A Proposal For Reform, Jill E. Fisch, Sean J. Griffith, Steven M. Davidoff

All Faculty Scholarship

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result …

Introduction To Institutional Investor Activism: Hedge Funds And Private Equity, Economics And Regulation, William W. Bratton, Joseph A. Mccahery

All Faculty Scholarship

The increase in institutional ownership of recent decades has been accompanied by an enhanced role played by institutions in monitoring companies’ corporate governance behaviour. Activist hedge funds and private equity firms have achieved a degree of success in actively shaping the business plans of target firms. They may be characterized as pursuing a common goal – in the words used in the OECD Steering Group on Corporate Governance, both seek ‘to increase the market value of their pooled capital through active engagement with individual public companies. This engagement may include demands for changes in management, the composition of the board, …

Confronting The Peppercorn Settlement In Merger Litigation: An Empirical Analysis And A Proposal For Reform, Jill E. Fisch, Sean J. Griffith, Steven M. Davidoff

Steven Davidoff Solomon

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result …

Delaware's Closed Door Arbitration: What The Future Holds For Large Business Disputes And How It Will Affect M&A Deals, Myron T. Steele, Thomas J. Stipanowich, Robert Anderson, James R. Griffin, Katherine Blair, Monica Shilling

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

Bankers And Chancellors, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

The Delaware Chancery Court recently squared off against the investment banking world with a series of rulings that tie Revlon violations to banker conflicts of interest. Critics charge the Court with slamming down fiduciary principles of self-abnegation in a business context where they have no place or, contrariwise, letting culpable banks off the hook with ineffectual slaps on the wrist. This Article addresses this controversy, offering a sustained look at the banker-client advisory relationship. We pose a clear answer to the questions raised: although this is nominally fiduciary territory, both banker-client relationships and the Chancery Court’s recent interventions are contractually …

M&A Under Delaware's Public Benefit Corporation Statute: A Hypothetical Tour, Frederick Alexander, Lawrence Hamermesh, Frank Martin, Norman Monhait

Lawrence A. Hamermesh

Noting the enthusiastic initial response to Delaware’s 2013 public benefit corporation statute, this Article presents a series of hypotheticals as vehicles for comment on issues that are likely to arise in the context of mergers and acquisitions of public benefit corporations. The Article first examines appraisal rights, concluding that such rights will be generally available to stockholders in public benefit corporations, and noting the potential for ambiguity in defining “fair value” where the corporation’s purposes extend to public purposes as well as private profit. Next, the Article examines whether and to what extent “Revlon” duties and limitations on deal protection …

The Plaintiffs' Lawyer's Transaction Tax: The New Cost Of Doing Business In Public Company Deals, Neva Browning Jeffries

Neva B Jeffries

This article addresses the proliferation of frivolous litigation in the context of public company deals. In 2012 93% of public company mergers and acquisitions valued at over $100 million and 96% of such transactions valued over $500 million incurred litigation. Through these “merger objection suits,” plaintiffs’ attorneys have successfully attached a transaction tax – in the form of attorneys’ fees – as the cost of doing business for public company mergers and acquisitions. Armed with the knowledge that time is of the essence in these transactions, plaintiffs’ attorneys understand the leverage they have to force a quick settlement with a …

“Comply Or Explain”—A Flexible Mechanism To Countervail Behavioral Biases In M&A Transactions, Gerrit M. Beckhaus

University of Miami Business Law Review

Mergers and acquisitions (M&A) are a common phenomenon of great importance in today’s business world. However, the majority of them fail to achieve the aspired objectives. These failures can be attributed to various circumstances, inter alia decision-makers’ vulnerability to behavioral biases due to the complexity, uncertainty, and time pressure characteristic of M&A transactions. Such biases often lead to predictable irrational behavior resulting in momentous misjudgments. Despite numerous psychological studies proving that people systematically tend to make irrational decisions under uncertainty, neither the transactional practice nor its current legal framework address this problem. Instead, the present law shields decision-makers from potential …

Sandbagging: Default Rules And Acquisition Agreements, Charles K. Whitehead

Cornell Law Faculty Publications

In the M&A world, a buyer "sandbags" a seller when, knowing the seller has materially breached a warranty, it closes the deal and then asserts a post-closing claim. Traditionally, the buyer must have relied on the warranty, without knowledge of the breach, in order to prevail. The modern trend, with some exceptions, permits the buyer to sue without regard to knowledge. Parties, in both cases, can contract around the default rule--so that the default rule should affect how acquisition agreements are structured. Yet, a survey of publicly available deals, from July 2007 to June 2011, reveals that--regardless of default rule--roughly …

National Security Review Of Foreign Mergers And Acquisitions Of Domestic Companies In China And The United States, Kenneth Y. Hui

Cornell Law School Inter-University Graduate Student Conference Papers

China’s recently enacted Anti-Monopoly Law has received much academic attention. In particular, many articles and comments have been written about Article 31 of the Anti-Monopoly Law, a provision on national security review of foreign mergers and acquisitions of domestic companies. The provision has often been labelled as draconian and protectionist. This paper argues that Article 31 is not necessarily so. Article 31 is actually, to a large extent, in line with the national security provisions found in liberal economies. By taking a comparative approach, this paper will demonstrate the similarities between the national security laws in China and the United …

Samuel Zell, The Chicago Tribune, And The Emergence Of The S Esop: Understanding The Tax Advantages And Disadvantages Of S Esops, Michael S. Knoll

All Faculty Scholarship

Samuel Zell’s acquisition of the Chicago Tribune Company (the Tribune) in December 2007 using a little-known type of Employee Stock Ownership Plan (ESOP) made headlines. In a complicated transaction, which took nearly a year to complete, the Tribune converted from a subchapter C corporation to a subchapter S corporation, established an ESOP that purchased 100 percent of the company’s equity, and sold Zell a call option giving him the right to purchase 40 percent of the company’s equity. Press reports claim that Zell’s novel structure enabled Zell to outbid other suitors. And financial commentators predict that many acquirers will employ …

How To Prevent Hard Cases From Making Bad Law: Bear Stearns, Delaware And The Strategic Use Of Comity, Marcel Kahan, Edward B. Rock

All Faculty Scholarship

The Bear Stearns/JP Morgan Chase merger placed Delaware between a rock and a hard place. On the one hand, the deal’s unprecedented deal protection measures – especially the 39.5% share exchange agreement – were probably invalid under current Delaware doctrine because they rendered the Bear Stearns shareholders’ approval rights entirely illusory. On the other hand, if a Delaware court were to enjoin a deal pushed by the Federal Reserve and the Treasury and arguably necessary to prevent a collapse of the international financial system, it would invite just the sort of federal intervention that would undermine Delaware’s role as the …

Workers, Information, And Corporate Combinations: The Case For Non-Binding Employee Referenda In Transformative Transactions, Matthew T. Bodie

All Faculty Scholarship

Employees present a curious puzzle for corporate law. The success of a corporation depends on its employees, from the chief executive officer down to the front-line production or service worker. But for the most part, corporate law relegates employees to the sidelines. Perhaps nowhere is this difference as dramatic as in the realm of mergers, acquisitions, and other transformative transactions. Such transactions are usually negotiated at the highest levels of management, approved by the board, and ultimately approved by the shareholders. In contrast, employees at most may be able to bargain about the effects of the merger through union representatives; …

China's Acquisitions Abroad - Global Ambitions, Domestic Effects, Nicholas C. Howson

Articles

In the past year or so, the world has observed with seeming trepidation what appears to be a new phenomenon-China's "stepping out" into the world economy. The move, labeled the "Going Out Strategy" by Chinese policy makers, sees China acting in the world not just as a trader of commodities and raw materials, or the provider of inexpensively-produced consumer goods for every corner of the globe, but as a driven and sophisticated acquirer of foreign assets and the equity interests in the legal entities that control such assets. The New Yorker magazine, ever topical and appropriately humorous, highlighted this attention …

Bank Mergers In North America: Comparing The Approaches In The United States And Canada, Eric J. Gouvin

Faculty Scholarship

This Article provides a summary comparison of the processes in the United States and Canada for governmental approval of bank mergers. The topic came to prominence in 1998 when four of Canada's five largest banks unveiled plans that would have resulted in the Royal Bank of Canada merging with the Bank of Montreal and the Toronto Dominion Bank combining with the Canadian Imperial Bank of Commerce ("CIBC"). These proposed mergers were rejected by the then Finance Minister, Paul Martin. The reasons given included: (1) the resulting banking industry structure would have concentrated too much economic power in the hands of …