Treading a Minefield: Avoiding Potential Traps in Public M&A Deals

Two recent decisions of the Delaware Court of Chancery, In re Topps and In re Lear Corporation, consider a number of important legal issues that arise in the context of public M&A transactions. Among them are the following:

Management conflicts of interest

. Delaware courts have recently expressed concern that the interests of senior management in negotiating friendly mergers may not be materially aligned with the interests of shareholders, particularly due to assurances by the buyer of continued employment.¹ Under the so-called Revlon standard, when directors propose to sell a company for cash or engage in a change of control transaction, they must take reasonable measures to ensure that shareholders receive the highest value obtainable. As the Delaware Court stated in Topps, "When directors bias the process against one bidder and towards another not in a reasoned effort to maximize advantage for the stockholder, but to tilt the process toward the bidder more likely to continue