Delaware as Deal Arbiter
77 Washington & Lee Law Review 1269 (2020).
48 Pages Posted: 5 Jun 2020 Last revised: 22 Oct 2020
Date Written: May 16, 2020
Most would agree that the Delaware courts are the leading jurists in the resolution of corporate conflicts, particularly in the Mergers & Acquisitions (M&A) context. Arguably a greater role that Delaware plays is that of a norm setter, both with respect to the expectations of management con-duct in the M&A process and with respect to deal terms, particularly deal protection devices. Like in any relationship, there is a “give and take” between practitioners and Delaware. That is, practitioners are “on the front lines,” often innovating with respect to new deal structures and deal terms. After some time, Delaware has the opportunity to review these innovations. As the Delaware courts render decisions, they comment on behavior in the deal process and on the legality of contractual provisions. In turn, practitioners take heed. They not only comply with these deal norms but, at least in the context of deal protection devices, they slowly push the boundaries. Delaware tends not to take issue with this boundary pushing as practitioners are largely complying with deal norms. This Article examines this relationship between practitioners and Delaware and argues that this circular effect has had the result of eroding the very enhanced scrutiny standards which the courts have announced.
Keywords: Delaware, mergers, norms, deal protection devices, Revlon, Unocal, Van Gorkom, lock-ups, M&A
JEL Classification: K22, K12, K20, K2, K00, K40, K41, K4
Suggested Citation: Suggested Citation