A Favorable Settlement in a Critical M&A

Companies pursuing mergers and acquisitions face the risk that investors will challenge the deal. This “Defining the Difference” highlights how H.S. Grace & Company, Inc.’s (HSG) expertise can help prevail in a derivative action against directors and officers in a large merger.

Allegations

Plaintiff shareholder sued ABC Company and certain of its officers and directors to enjoin a proposed acquisition of ABC by XYZ Company.
Plaintiff shareholder contended that ABC and its officers and directors had breached their fiduciary duties by:

1) Failing to include material disclosures in the proxy for the proposed acquisition;

2) Failing to include key provisions in the merger agreement;

3) Agreeing to an unfair transaction price; and

4) Failing to address alleged conflicts of interest in the transaction.

HSG was retained by ABC, its officers and directors, and their counsel to analyze these allegations.

Analysis

HSG’s team of senior management executives was able to review and evaluate these detailed allegations and demonstrate their lack of credibility in the short time frame dictated by the injunction process. Specifically, HSG determined:

The Board and management acted properly; they were well-informed and demonstrated reasonable and proper business practices and processes in reaching and executing the merger agreement.
The pertinent terms of the merger agreement were consistent with reasonable business practices in mergers of this type.
The transaction price was fair, and the fairness opinions relied on by the Board were reasonable and consistent with normal business practices.
The disclosures in the proxy were appropriate.

Result

Following the deposition testimony of Stephen Grace on the results of HSG’s analysis, counsel for ABC and its directors and officers negotiated a favorable settlement, allowing the merger to proceed essentially as planned.

Testifying Resources

HSG Evaluates Appropriateness of Directors’ and Officers’ M&A Due Diligence

+1.713.572.6800

+1.212.644.8620