CD: Could you provide a brief overview of recent high-profile post M&A dispute cases? What lessons have been learned from outcomes?

Ohlms: One case that attracted our attention which was recently resolved was the Johnson & Johnson vs. Guidant Corporation case out of the United States District Court for the Southern District of New York. At issue was whether Guidant violated an earlier merger agreement with Johnson & Johnson, allowing it to obtain a higher price from Boston Scientific. The case is a great reminder to try to think through all of the permutations that a provision may introduce into a transaction. While Guidant clearly believed that allowing the diligence to the third party was permitted given its necessary role in Guidant’s transaction with Boston Scientific, the language at issue did not explicitly address such a scenario. No one is ever going to be able to draft an M&A agreement that contemplates and explicitly addresses every twist or turn a transaction may take, but if it was important enough to include a no solicitation provision, perhaps more effort should have been made to flush out the line between solicitation and responding to an unsolicited offer. The other lesson is how costly and time consuming this type of litigation can be. The cost is not made up solely of the legal fees or the settlement dollars paid, but also includes the value of the time spent by company leaders addressing the litigation as opposed to advancing their business.

Holwell: Litigation is endemic to M&A transactions. Historically, shareholders have challenged over 90 percent of public company M&A deals. Most of these are settled before the transaction closes and are essentially a strategic tool for inducing, or defending against, a proposed sale, or perhaps, as a means of securing a healthy contingent fee for plaintiffs’ counsel. By contrast, private company M&A litigation typically arises post-closing, when either the buyer’s or seller’s expectations are not met, so they resort to a court or arbitrator as a means of renegotiating pricing. Far from being resolved promptly, post-closing disputes can be costly and time consuming to both sides. 

Apr-Jun 2015 issue

Freeborn & Peters LLP

Holwell Shuster & Goldberg LLP

Kulkov, Kolotilov and Partners (KK&P)

Skadden, Arps, Slate, Meagher & Flom LLP

Von Wobeser & Sierra