In re Rural Metro Corporation Shareholders Litigation, No. 3650-VCL, 2014 WL 971718 (Del. Ch. March 7, 2014), will send chills through the investment banking community. The Rural Metro case, following in the wake of the Chancery Court’s El Paso, Atheros and Del Monte decisions, demonstrates the Delaware Court’s heightened sensitivity to investment bankers’ potential conflicts of interest that may compromise their loyalty and objectivity.1
Boards should carefully consider potential conflicts of interest when selecting financial advisors and should specifically discuss and consider imposing limits upon the sell-side financial advisor’s ability to provide staple financing or otherwise participate in buy-side financing.
1 In re El Paso Corp. S’holder Litig., 41 A.3d 432, 439 (Del. Ch. 2012); In re Atheros Commc’ns S’holder Litig., No. 6124-VCN, 2011 WL 864928 (Del. Ch. March 4, 2011); In re Del Monte Foods Co. S’holder Litig., 25 A.3d 813, 830-31 (Del. Ch. 2011).
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