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Court Of Chancery Grapples With Synergy Issue

Posted In Appraisal

Huff Fund Investment Partnership v. CKx Inc., C.A. 6844-VCG (May 19, 2014)

Under Delaware appraisal law, the fair value to be awarded to a stockholder does not include any "synergies" achieved by the merger itself.  What is a "synergy?"  An easy example is when the combined companies may realize some economy of scale because of their combination.  After all, but for that combination, the stockholders in the pre-merged companies would not have been able to obtain that benefit.  The question gets cloudier, however, when considering some post-merger plans the acquirer implements that improve operations. Is it a "synergy" when the old company might have done the same improvement on its own had it thought of it?   This decision grapples with that question. It suggests that the answer lies in whether any post-merger improvement was "on the table" at the time of the merger and was not a new idea thought up only by the acquirer.

Tags: Appraisal