The Board’s Role in M&A Transactions

May 7, 2014

Practical Law logo newMore M&A activity over the next 18 months is expected due to continuing improvements in economic conditions, significant cash reserves in corporate hands, increases in hedge fund activity and investor pressures for growth in shareholder returns.

Whether a potential M&A transaction is initiated or welcomed by the company to be acquired or results from an unwelcome suitor’s offer, the board plays a critical role. The board must evaluate whether the transaction is in the best interests of the company and its shareholders such that it should be pursued or rejected.

Two current trends add complexity to the board’s role:

  • The increase in shareholder activism focused on M&A transactions.
  • The virtual certainty that an M&A transaction will lead to litigation.

This article explores the board’s role in light of these complexities and discusses:

  • The litigation risk arising from an M&A transaction, and the standards of judicial review for challenged transactions.
  • Recent Delaware cases involving potential conflicts of interest of the board and its financial advisors.
  • Steps a board should take to be well prepared for any M&A transaction that may arise.
  • Issues that boards should consider when evaluating a proposed deal.

To read the full article, click here.