Conflicted M&A Deals at Private Companies: Emerging Issues

Description

Private M&A deals can present actual or potential conflicts for boards of directors, particularly when the stockholders include private equity firms or venture capital funds, or other controlling or dominant stockholders whose interests might differ from those of other stockholders.

For example, the divergent interests of preferred and common stockholders were at issue in In re Trados Shareholder Litig. Although the court ultimately ruled that the board did not breach its fiduciary duties, the board was held to an entire fairness standard on account of the conflicts inherent in the affiliation of the board members with the venture capital firm that owned preferred shares.

In contrast, the Delaware Chancery Court applied the business judgment rule in a going-private transaction between a controlled company and its controlling shareholder in In re MFW Shareholders Litig. The ruling in SEPTA provided further discussion of the business judgment rule in a sale involving a controlling stockholder.

Listen as our authoritative panel of M&A attorneys analyzes fiduciary duties in private company M&A deals, emerging issues in conflicted deals involving controlling shareholders, and boards with conflicts due to affiliation with controlling investors. The panel will review recent deal litigation that provides some guidance for private company M&A deals.