Dell Appraisal and the Business Judgement Rule
Posted: 12 Mar 2018
Date Written: March 1, 2018
This paper addresses problems with certain valuation issues in mergers, and “fair value” calculations in appraisal proceedings. All the variables in valuation models have inherent uncertainties and these are discussed using specific illustrations from the 2016 Dell appraisal decision. The paper shows why these uncertainties are inescapable and why any conclusions based on them must depend on someone’s business judgment. Whose business judgment that should be is the critical question and after considering several alternatives the paper concludes that the judgment of a corporation’s directors should prevail, which is also a well-established legal principle known as the business judgement rule.
Keywords: Appraisal, Business Judgment Rule, Corporate Governance, Dell, Efficient Market Theory, Fair Value, Fiduciary Duty
JEL Classification: K22
Suggested Citation: Suggested Citation