When Appraisal is Likely to Be Below the Deal Price in Arm’s-Length Mergers…and When It is Not— The Meaning of <em>Aruba, AOL</em> and <em>SWS</em>

When Appraisal is Likely to Be Below the Deal Price in Arm’s-Length Mergers…and When It is Not— The Meaning of Aruba, AOL and SWS


By: Andrew J. Colosimo, Warren S. de Wied, Steven Epstein, Christopher Ewan, Arthur Fleischer, Jr., Andrea Gede-Lange, David J. Greenwald, Randi Lally, Mark H. Lucas, Scott B. Luftglass, Brian T. Mangino, Brian Miner, Philip Richter, Robert C. Schwenkel, David L. Shaw, Peter L. Simmons, Matthew V. Soran, Steven J. Steinman, Gail Weinstein, Maxwell Yim

Since the Delaware Supreme Court issued its landmark Dell appraisal decision in December 2017, the Delaware courts have issued three appraisal decisions—Aruba, AOL, and SWS. Notwithstanding the holding in Dell that, in the case of an arm's-length merger with a robust sale process, the deal price is generally the best “proxy” for (and should be given “heavy, if not determinative weight” in determining) fair value, in each of these post-Dell cases, the appraisal result was below the deal price. The below-the-deal-price result was reached whether the court viewed the sale process as having been robust or not and whether the court relied on market-based factors or a DCF analysis. In the attached Fried Frank M&A/PE Briefing, we discuss this new trend of below-the-deal-price appraisal results, analyze the likely practical impact, and offer related practice points.

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