Delaware Business Litigation Report

Court of Chancery Explains Proper Merger Negotiations

In Re: Lear Corporation Shareholders Litigation, C.A. No. 2728-VCS (June 15, 2007).

The tactics to use and the terms to seek in merger negotiations are often debated and misunderstood. In this decision, the Court sets out considerable guidance on what to do and what to avoid.  Moreover, the Court once again points out the problem created by leaving too much of the work to the CEO whose personal economic interests are also at stake. In short, that is a process to be avoided.

The Court's extended discussion of termination fees, go-shop provisions, voting agreements and matching rights are mandatory reading for anyone with a role to play in an M& A deal.

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