Re-evaluating the Emerging Standard of Review for Matching Rights in Control TransactionsIrreconcilable Differences: Director, Manager, Shareholder Conflicts in Control Transactions (2011)
AbstractThis Article argues that courts should re-evaluate the emerging legal standard governing the use of “matching rights” in merger agreements. Matching rights are deal protection devices intended to either deter second bidders or to ensure that, in the event a second bidder appears, the initial bidder will be advantageously positioned to succeed in completing the acquisition. Plaintiffs have brought challenges to the use of matching rights in various circumstances. Until now, however, courts have refused to acknowledge that there might be circumstances in which matching rights are preclusive deal protections and therefore unreasonable. Consequently, the emerging legal standard with respect to matching rights is one of permissiveness. In fact, there are circumstances in which one can expect matching rights to be potentially powerful deterrents to second bidders. In such circumstances, the use of matching rights may be unreasonable. Courts should employ the same fact-intensive review to the use of matching rights that they employ with respect to other deal protection measures. Courts, once sensitized to the specific deterrent effects of matching rights, should more closely scrutinize the use of matching rights, particularly when the right-holder is a financial buyer or the sales process demonstrates characteristics of a common value sale.
Publication DateApril 11, 2011
Citation InformationBrian JM Quinn. "Re-evaluating the Emerging Standard of Review for Matching Rights in Control Transactions" Irreconcilable Differences: Director, Manager, Shareholder Conflicts in Control Transactions (2011)
Available at: http://works.bepress.com/brian_quinn/32/