Recent Developments for Private Company M&A

This report highlights some recent developments relevant to private company M&A. Part 1 provides a summary of some recent Delaware caselaw. Several decisions provide important drafting lessons on topics such as damages multipliers, indemnification notice provisions, materiality scrapes, and earnouts. A group of decisions provides lessons on noncompetes, including the greater scope available with forfeiture-for-competition provisions. Other decisions address the sharing of information by a director with its nominating shareholder, common gaps in amendment provisions for shareholder agreements, and the importance of considering contractual confidentiality obligations when populating deal data rooms. 

The three Delaware Supreme Court decisions summarized at the end of Part 1 reversed recent Chancery Court decisions that were favorable to plaintiffs’ firms, one involving a controlling stockholder and two involving aiding and abetting liability of buyers. These decisions can be considered within the context of the first section in Part 2, which addresses DExit and Delaware’s response in Senate Bill 21.

The remaining sections in Part 2 address some regulatory and other developments impacting private company M&A. Regulatory developments include antitrust laws, including enforcement activity of the antitrust agencies under the new administration, and recent state merger enforcement efforts. There is also an overview of “mini-HSR” laws that crop up in healthcare deals. There is an overview of developments relating to CFIUS and national security laws, and a brief summary of the federal government’s increasingly frequent role as a deal participant. Part 2 also includes a brief overview of some recent developments in representation and warranty insurance, and an overview of debt financing trends for private company M&A. The last section in Part 2 addresses SEC updated guidance that impacts the ability of public companies to require target shareholders to enter into lock-ups and written consents in deals using form S-4 registration statements, which is an issue that often arises when smaller public companies acquire private targets in deals with stock consideration.