Recent Revlon Ruling Reaffirms Rules

In a recent New York Superior Court decision applying Delaware Law, the court held that what are known as the “Revlon Duties” do not apply in a stock for stock merger where there is no true change of control.

In the specific case, the stock merger resulted in a combined corporation in which there was no controlling shareholder, only a larger group of non-controlling shareholders.  This was key to the decision as the language of the court decision makes clear:

“In the context of a stock-for-stock merger, a change of control for Revlon purposes can be triggered if the target’s shareholders are relegated to a minority in the resulting entity, and the resulting entity has a controlling stockholder or stockholder group. Where, however, ownership of the merged company will remain in “a large, fluid, changeable and changing market,” Revlon is not implicated.”(1)

Rather than holding the corporation’s board’s decision to approve the merger to the standards in “Revlon”, the board’s decision was held to the standards of the business judgement rule which defers to the judgement of the board if it acts in an informed basis, in good faith, and in the honest belief that its actions are in the best interests of the company.

Click here to read ReedSmith, the law firm’s, post on this decision.

(1) Badowski, at *7 (citing, inter alia, Arnold v. Society for Savings Bancorp. Inc., 650 A.2d 1270, 1290 (Del 2009); Smurfit-Stone Container Corp. S’holder Litig., No. 6164-VCP, 2011 WL 2028076, *12 n. 92 (Del Ch. May 24, 2011)).

In M&A, Is Flat the New Up?

By Dennis McCarthy – (213) 222-8260 – dennis@mbsecurities.com – 

In my experience with M&A deals, everything increases; it goes up.

All projections show increases in revenues and profits.  If you buy a company today, you’ll sell it for more money later.  Deals get bigger. Debt leverage goes up.  M&A multiples go up.  The M&A business, itself, goes up.  But what if…?

That’s the sobering message from  a study of middle market M&A published by Deloitte, the international accounting firm, looking back over 2011 and 2012.

Deloitte reports that between 2011 and 2012, middle market M&A was flat.  Deal volume was flat. Average deal value was flat.  Purchase price multiples were flat. Senior debt multiples were flat.  You get the idea.

But look on the bright side.  At least those metrics were flat.

International acquisitions of US middle market companies declined.

Purchase price multiples of LBOs declined.

All things considered, flat may not be so bad.  Maybe flat is the new up.

Supposedly, statistics don’t lie.  But 2012 certainly seemed to me to be a better, more active year than 2011.

Company executives I know seemed to be more confident that the economy was stable.  Not big growth but no big problems either.

Maybe we won’t see the impact of the improved environments until this year, 2013, given how long it takes to close an M&A deal,

I know I’m looking forward to an active 2013.  In any event, I’ll take flat over down every time.

I’ve attached a link to the Deloitte report below.

Please contact me to help your company with M&A or any capital market project. 

Deloitte US Middle Market M&A Stats 2012

 

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