Keeping You Apprised of Developments in Deal Making

Locke Lord QuickStudy: DOJ Announces New Policy on Credit for Antitrust Compliance Programs

On July 11, 2019, the Antitrust Division of the Department of Justice announced a substantial shift in its policy for incentivizing and rewarding the use of corporate compliance programs. For the first time, the Division will now consider the adequacy and effectiveness of a company’s antitrust compliance program in its charging decision—even when a company loses the race to be first under the Corporate Leniency Policy—and in appropriate cases will permit the use of deferred prosecution agreements instead of indictments or guilty pleas.

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Delaware Recognizes Reality of Merger Negotiations in Upholding Application of Business ‎Judgment Rule

In In re Towers Watson & Co. Stockholders Litigation, 2019 WL 3334521 (Del. Ch. July 25, 2019), the Delaware Court of Chancery applied the business judgment rule to dismiss a stockholder suit challenging the $18 billion merger of equals between Towers Watson & Co. and Willis Group despite allegations of imperfections in the merger negotiations.

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Understanding Delaware Appraisal Risk Today

Exposure to claims for appraisal can be a significant risk in merger and acquisition transactions in ‎which dissenter’s appraisal rights are available. This risk has increased in recent years as ‎aggressive investors realized the opportunities presented by appraisal arbitrage, including the high ‎rate of interest payable on appraisal awards, even for shares purchased after announcement of the ‎transaction.‎

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Texas Supreme Court Confirms that Industry Customs cannot Qualify Unrestricted ‎Consent to Assign Provisions

On June 28, 2019, in Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc.[1], the Texas Supreme Court confirmed that industry customs cannot qualify an unrestricted consent-to-assign provision contained in a farmout agreement, nor is such a provision subject to any implied duty of good faith or fair dealing. The ruling was hotly contested, evidenced by both the 5-4 decision and the multitude of letters received by the court from industry players.

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Delaware Court of Chancery Confirms Ability of Stockholders to Assert Third-Party Beneficiary Claims Under Merger Agreements

A common provision in merger agreements is denial of the right of non-parties to the agreement to assert third-party beneficiary claims.  The use of this provision left open the question whether stockholders of a disappearing target company could enforce contractual undertakings of the acquirer following the closing of the merger.

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Attempt to Limit Directors’ Liability for Setting Their Own Compensation is Rejected

A recent Delaware Court of Chancery decision ‎ on a challenge to Goldman Sachs directors’ ‎setting their own compensation is interesting because the court rejected the company’s attempt to ‎make an end run around current law. The stockholder-approved compensation plan included a ‎novel provision limiting the directors’ liability if they acted “in good faith.”‎

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Delaware Court of Chancery Provides Reminder of Importance of Privilege Carve-Out Provision ‎in Merger Agreement

On May 29, 2019 in Shareholder Representative Services, LLC v. RSI Holdco, LLC,‎ ‎ the ‎Delaware Court of Chancery, by giving effect to a merger agreement provision, reemphasized the ‎guidance it gave in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP ‎ that a ‎seller in a private-company merger may use its “contractual freedom” to retain the attorney-client ‎privilege for pre-closing communications by including explicit language to that effect in the ‎merger agreement.‎

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