A recent Delaware Court of Chancery decision is illustrative of the principle that merger partners should not assume that anything less than strict compliance with notice requirements (particularly when they relate to termination rights) and deadlines in a merger agreement will be enforced. The case is also a cautionary tale of why one merger partner should never assume that the other merger partner still wants to do the deal as much as it does.
A recent decision applied the framework established by the Delaware Supreme Court in Kahn v M&F Worldwide Corp (MFW) and found that a merger transaction with a controlling private equity fund on both sides was entitled to business judgment review. The decision outlines the elements of the MFW roadmap and clarifies that its ab initio requirement requires only that the elements be in place prior to the commencement of negotiations.
While Kahn v M&F Worldwide Corp provided helpful guideposts for avoiding an entire fairness review in controlling stockholder transactions, as with any new doctrine, questions remained as to the judgment's application to different types of deal and negotiation and the consequences of small deviations from strict adherence therein. Recent guidance from the Delaware Court of Chancery has given way to updated ground rules for controlling stockholder transactions.