How does one lock-up a friendly deal after Omnicare v NCS?
Avainsanat:
corporate law, M&A, Delaware law, duty of care, deal protection service, fiduciary out, lock-upAbstrakti
Deal protection devices are contractual terms in a merger agreement. They motivate parties to consummate the underlying transaction. The Delaware Supreme Court held in its 2003 decision, Omnicare Inc. v. NCS Healthcare Inc. (“Omnicare”), by a 3 to 2 vote, that the NCS board had breached its fiduciary duties by accepting deal protection devices that created “an absolute lock-up”. The Omnicare decision created a new legal rule: the target board has to retain an effective fiduciary out provision that allows the board to terminate the deal if it receives a superior proposal from another company. However, due to other courts’ narrow construction of Omnicare and practitioners’ creative crafting of new deal protection devices, there is a good reason to believe that Omnicare has limited applicability today.
