•  
  •  
 

Hofstra Law Review

Authors

Ely R. Levy

Abstract

This paper examines Delaware's judicial treatment of deal protection measures, particularly termination fee provisions. The paper explores the tension between the economic function of these provisions in inducing bidders and potentially compensating them for opportunity and transaction costs in the event of deal termination vs. the ability of large termination fees to constrain and coerce shareholder choice by obligating the target to pay out the fee in the event of a shareholder no vote.

In light of these issues, the paper explores the different standards of review that Delaware courts have and could potentially apply in ex post review of agreements containing termination fees. Ultimately, the paper argues that there are sufficient policy justifications to adopt more substantive review of these provisions. In light of several identifiable policy justifications, the paper suggests that a best interest standard that is used by bankruptcy courts in their more substantive review of termination fees in asset purchase agreements be adopted by the Delaware Courts analogously in the mergers and acquisitions context.

Included in

Law Commons

Share

COinS
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.