Will the EU still use English? Yes, says BBC Europe editor Katya Adler. There will still be 27 other EU states in the bloc, and others wanting to join in the future, and the common language tends to be English – “much to France’s chagrin”, she says.
A categorical/presumptive rule is bad law. The mandatory language of Section 262 of the Delaware General Corporate Law (DGCL) directs the Court of Chancery to “take into account all relevant factors” in determining fair value. As explained below, the appraisal remedy is separate and distinct from the common law governing fiduciary duties and cleansing conflicts of interest. A merger-price presumption would also disregard the principles enunciated in Weinberger v. UOP, 457 A.2d 701 (Del. 1983), directing the Court of Chancery to value companies using methodologies recognized and applied by professionals in the field, including (but not limited to) discounted cash flow (DCF) analysis. Instead, a broadly hewn “Merger Price” rule would effectively nullify the appraisal remedy, undermining the statutory mandate of \S~262.
A categorical/presumptive rule is also bad economics: To be sure, the price resulting from an arm’s-length process may accurately reflect fair value. But not always. In numerous seemingly benign cases, a facially disinterested process can still render a price falling short of fair value. In such situations, fair compensation requires an appraisal rule that is independent of the merger price. In fact, even the credible threat of an appraisal untethered to the merger price increases the chance that a market process will more accurately reflect fair value, as both bidders and target boards internalize the cost of approving a transaction at the lowest end of the range of fair values. As explained below, this ex ante benefit persists even if appraisals are prone to judicial error.
Finally, a categorical/presumptive rule is bad legal policy. Simply put, context matters: The evidentiary value of the deal price is a highly fact-sensitive question, ill-suited to a bright-line test. Any attempt at judicial line-drawing—preordaining circumstances where the transaction price must (or must not) be taken as conclusive—is doomed to be both over- and under-inclusive. The jurisprudential straightjacket urged by Appellant undermines the judicial discretion of Delaware’s sophisticated judiciary—a key factor in Delaware’s corporate law dominance.
- Merion Capital, LP, et al. v. Lender Processing Services, Inc., C.A. No. 9320-VCL, memo. op. (Del. Ch. Dec. 16, 2016)
“… [T]the figure of $38.67 per share is my best estimate of the fair value of the Company based on the DCF method.
… As noted, a DCF analysis depends heavily on assumptions. Under the circumstances, as in [Merlin Partners, LP, et al. v. AutoInfo, Inc., C.A. No. 8509-VCN, memo. op. (Del. Ch. Apr. 30, 2015),] and [Merion Capital, LP, et al. v. BMC Software, Inc., C.A. No. 8900-VCG, memo. op. (Del. Ch. Oct. 21, 2015)], I give 100% weight to the transaction price.”
Evaluating the reliability and persuasiveness of the deal price for purposes of establishing fair value in an appraisal proceeding is a multifaceted, fact-specific inquiry. The relevant factors can vary from case to case depending on the nature of the company, the overarching market dynamics, and the areas on which the parties focus. The last is perhaps an underappreciated aspect of appraisal jurisprudence. Because an appraisal decision results from litigation in which adversarial parties advance arguments and present evidence, the issues that the court considers and the outcome that it reaches depend in large part on the arguments that the advocates make and the evidence they present. An argument may carry the day in a particular case if counsel advance it skillfully and present persuasive evidence to support it. The same argument may not prevail in another case if the proponents fail to generate a similarly persuasive level of probative evidence or if the opponents respond effectively.
- Gibson Dunn & Crutcher LLP, Issues and Best Practices in Drafting Drag-Along Provisions
- Gibson Dunn & Crutcher LLP, Planning for Your Annual Shareholder Meeting: Selected Considerations for a Virtual-Only Meeting
(Nov. 16, 2016)