MERGER & ACQUISITION LAW UPDATE

Transcription

1 MERGER & ACQUISITION LAW UPDATE September 16, Amendments to Delaware Law Affecting Mergers & Acquisitions In July 2014 the Delaware governor signed into law several amendments affecting mergers and acquisitions. We summarize the substantive effects of several of these amendments below: Litigation Reform Bylaws The biggest news is probably what did not happen: the Delaware legislature did not adopt any legislation prohibiting companies from adopting bylaw provisions curbing M&A lawsuits. These bylaw provisions are usually listed as exclusive forum, fee-shifting and mandatory arbitration. Corporations have adopted these as a means to deter what they describe as abusive M&A litigation. Whether it is abusive can be debated; what is not up for debate is that the lawsuits are numerous: almost all public company M&A deals are subject to litigation. According to one study, in 2013, 94% of public company M&A deals were challenged by stockholders, and public company M&A deals attracted an average of more than five lawsuits. 1 At least some of these litigation reform bylaw provisions will be revisited by Delaware in These bylaw provisions will be the subject of an upcoming Kutak Rock M&A Law Update. Amendments to Section 251(h) Delaware clarified Section 251(h) to make so-called medium form mergers easier to complete. These mergers basically allow the acquiring corporation to effect a public tender offer for the target corporation and then accomplish the complete acquisition without a second step merger. Specifically, these amendments do the following: Clarify that Section 251(h) applies to merger agreements that permit or require the merger to be effectuated under Section 251(h). 1 Shareholder Litigation Involving Mergers and Acquisitions: Review of 2013 M&A Litigation (Cornerstone Research 2014) Litigation-Involving-Mergers-and-Acqui.aspx (accessed 9/14/2014) Copyright 2014, Kutak Rock LLP. All rights reserved.

2 Eliminate the prohibition against using Section 251(h) if a party to the merger agreement is an interested stockholder (i.e., owner of 15% or more of the corporation s voting stock). Address certain questions regarding the front-end offer, timing, and ownership requirements that have arisen in connection with Section 251(h) deals. Basically, the front-end offer must be for all of the outstanding stock of the target corporation. Springing Consents These amendments, in essence, allow the acquiring corporation to establish the target corporation s board (and to take certain actions) at or prior to the closing without the necessity of having yet another post-closing meeting or consent. Specifically, these amendments do the following: Amendments to Section 141(f) authorize board actions by written consent to become effective at a future time (including upon the occurrence of an event), no later than sixty (60) days after the time of execution (revocable at any time prior to the effective time). Such future written consent may be executed by any person, even if not a director at the time, so long as such person is a director at the future effective time of the consent. Amendments to Section 228(c) are intended to mirror those in Section 141(f) and permit stockholder written consents to be executed by persons, though not stockholders, to be effective at a future time (including upon the occurrence of an event) no later than sixty (60) days after the time of execution (revocable at any time prior to the effective time). For non-corporations 2, this same concept of springing consents has been approved, absent the sixty (60) day requirement. While springing consents are the default, they can be varied by the partnership agreement or limited liability company agreement. Certificate of Incorporation Amendments Section 242 amendments permit Delaware boards of directors the flexibility to approve ministerial amendments to the corporation s certificate of incorporation, without the necessity of obtaining stockholder approval. The caveat to this exists where the corporation s certificate of incorporation expressly requires stockholder approval. Such ministerial amendments include (1) changing the corporation s name, (2) deleting historical references to the initial incorporator, initial directors and initial subscribers for stock, and (3) deleting provisions relating to previously effected changes to stock. * * * 2 Section (d) of the LLC Act; Sections (e) and (d) of the LP Act; and Section (d) of the GP Act 2

3 Contacting Kutak Rock LLP This publication is provided by Kutak Rock LLP as a service to clients and colleagues. The information contained in this publication should not be construed as legal advice, and no legal or business decisions should be based upon its contents. Questions regarding the matters discussed in this publication may be directed to Mitch Woolery (mitch.woolery@kutakrock.com), or any Kutak Rock LLP lawyer listed herein or with whom you have consulted in the past on similar matters. If you have not received this publication directly from us, you may obtain a copy of any past or future related publications from Jodi L. Kopke ( ; jodi.kopke@kutakrock.com) in our Denver office. Disclaimer per Missouri Rules of Professional Conduct: The choice of a lawyer is an important decision and should not be based solely upon advertisements. This communication may be considered advertising in some jurisdictions. About Kutak Rock LLP Kutak Rock LLP is a national law firm of more than 500 lawyers in 17 locations from coast to coast. Our M&A team consists of more than 50 attorneys. While our M&A representations span from Fortune 100 companies to smaller transactions, we have developed a significant niche practice in Middle Market M&A, especially among entities with an enterprise value of $25-$750 million. Kutak Rock LLP Contacts Name Office Phone Number Michael W. Alvano Omaha (402) Steven P. Amen Omaha (402) Paul E. Belitz Denver (303) Glenn E. Borkowski Little Rock (501) Jennifer S. Brown Kansas City (816) Michael K. Bydalek Omaha (402) Brian V. Caid Denver (303) Robert L. Cohen Omaha (402) James C. Creigh Omaha (402) David C. Cripe Denver (303) Mark A. Ellis Omaha (402) Edward P. Gonzales Omaha (402) Rayburn W. Green Fayetteville (479)

4 H. Watt Gregory, III Little Rock (501) Arkan Haile Denver (303) L. Keith Harvey Little Rock (501) Daniel L. Heard Little Rock (501) Christopher S. Heroux Denver (303) Nathan P. Humphrey Denver (303) Stephen J. Ismert Denver (303) Jeremy T. Johnson Washington (202) Joseph O. Kavan Omaha (402) Jeffrey S. Makovicka Omaha (402) Christopher C. May Fayetteville (479) C. David McDaniel Little Rock (501) Matthew S. McElhiney Denver (303) Emily A. McProud Kansas City (816) Carol J. Mihalic Denver (303) Neil M. Miller Kansas City (816) Jolyn J. Moses Denver (303) Debby Thetford Nye Fayetteville (479) Peggy A. Richter Denver (303) William E. Roberts Kansas City (816) Gil B. Rosenthal Denver (303) Robert C. Roth, Jr. Denver (303) Lee F. Sachnoff Denver (303) Lisa A. Sarver Omaha (402) Anthony D. Scioli Omaha (402) Jennifer K. Sewell Omaha (402) David A. Smith Little Rock (501) Mitch Woolery Kansas City (816)

5 Atlanta 225 Peachtree Street, NE Suite 2750 Atlanta, GA Chicago One South Wacker Drive Suite 2050 Chicago, IL Denver 1801 California Street, Suite 3000 Denver, CO Fayetteville 234 East Millsap Road, Suite 200 Fayetteville, AR Irvine 5 Park Plaza, Suite 1500 Irvine, CA Kansas City 1010 Grand Boulevard, Suite 500 Kansas City, MO Little Rock 124 West Capitol Avenue Suite 2000 Little Rock, AR Los Angeles 601 South Figueroa Street Suite 4200 Los Angeles, CA Minneapolis 220 South Sixth Street, Suite 1750 Minneapolis, MN Oklahoma City 6305 Waterford Boulevard Suite 475 Oklahoma City, OK Omaha The Omaha Building 1650 Farnam Street Omaha, NE Philadelphia Two Liberty Place, Suite 28B 50 South Sixteenth Street Philadelphia, PA Richmond Bank of America Center, Suite East Main Street Richmond, VA Scottsdale 8601 North Scottsdale Road Suite 300 Scottsdale, AZ Spokane Bank of America Financial Center 601 West Riverside Avenue Suite 1700 Spokane, WA Washington 1101 Connecticut Avenue, NW Suite 1000 Washington, DC Wichita 1650 North Waterfront Parkway Suite 150 Wichita, KS