Mergers & Acquisitions
Winter 2023
Overview
The market for corporate control has been a vibrant element of Anglo-American capitalism for well over a century, and acquisitions have become increasingly prevalent in other economies around the world. Although mergers often have beneficial aspects—for example, the threat of an acquisition may have a disciplining effect on underperforming executives—they also often pose a number of problems for shareholders and broader society alike. The goal of this course is to provide students with a layered understanding of M&A, which connects the details of contract design and black letter law with contemporary policy debates. The student thus will not only be prepared for the immediate demands of a transactional practice but also have a conceptual foundation for the development of expertise over time.
The M&A class also provides an unparalleled opportunity to explore institutional design issues. In the United States, a number of federal and state laws combine to form a constellation of complementary institutions regulating the market for corporate control. The M&A lawyer’s prowess is found in her ability to master the core aspects of each part of that constellation, both when structuring a transaction and when disputes arise.
There are technically no pre-requisites for the class. However, it will be very challenging to do well in the course without first having taken the introductory Business Organizations class.
Readings
Daily readings will typically involve a selection from Hill, Quinn & Davidoff Solomon, Mergers and Acquisitions: Law, Theory, and Practice (2d ed.) ("HQS") and a collection of key cases, statutory provisions, deal materials, and/or academic/practitioner commentary. If you're looking for a concise treatment of the topics we cover in class, then Bainbridge's short treatise is highly recommended, although by no means required for the class. From time to time, we will read other materials, and they are made available below.
Monday, January 9, 2023 | Introduction to M&A - No reading assignment
Wednesday, January 11, 2023 | Deal Structures - HQS Chapter 2, pp. 31-60
Wednesday, January 18, 2023 | Accounting and Valuation - HQS Chapters 9 and 10
Monday, January 23, 2023 | Accounting and Valuation - HQS Chapters 9 and 10
Wednesday, January 25, 2023 | Class cancelled
Monday, January 30, 2023 | Accounting and Valuation - HQS Chapters 9 and 10
Wednesday, February 1, 2023 | Designing an M&A Transaction - HQS Chapters 12 and 13
Monday, February 6, 2023 | Designing an M&A Transaction - HQS Chapter 14
Wednesday, February 8, 2023 | Designing an M&A Transaction - HQS Chapter 14
Monday, February 13, 2023| Designing an M&A Transaction - HQS Chapter 14
Wednesday, February 15, 2023 | Designing an M&A Transaction - HQS Chapter 14
Monday, February 28, 2023| Designing an M&A Transaction - HQS Chapter 14
Wednesday, March 1, 2023 | Designing an M&A Transaction - HQS Chapter 14
Monday, March 6, 2023 | Federal Securities Regulations Applicable to M&A - HQS Chapters 4 and 5
Wednesday, March 8, 2023 | Resisting the Hostile Offer - HQS Chapter 15
Monday, March 13, 2023 | Adopting Defensive Measures - HQS Chapter 16
Wednesday, March 15, 2023 | Adopting Defensive Measures - HQS Chapter 16 and additional reading assigned below
Monday, March 20, 2023 | Fiduciary Duties When Selling the Corporation - HQS Chapter 18
Wednesday, March 22, 2023 | Material Adverse Effect Disputes -- see reading assignments below
Monday, March 27, 2023 | Freezeouts - HQS Chapter 19 (until page 724)
Wednesday, March 29, 2023 | Deal Protections - HQS Chapter 16 (pp. 553-569)
Tuesday, March 29, 2022 | The Antitrust Review of Mergers - HQS Chapter 8
Thursday, March 31, 2022 | Merger Review Simulation - See daily class detail below for reading assignments
Tuesday, April 5, 2022 | Merger Review Simulation - See daily class detail below for reading assignments
Thursday, April 7, 2022 | The Antitrust Policy of Mergers - See daily class detail below for reading assignments
Useful Resources
Because the M&A market is so systemically important, there is a lot of media coverage and commentary relating to it. Some resources that I think are useful for getting one's head around the market and following recent developments are as follows:
Matt Levine's Money Stuff Newsletter at Bloomberg
Daily Class Details and Materials
This section contains materials, both required and supplemental, for each day we meet in the course.
January 9, 2023 | Introduction to the M&A Market
Today's class is a high-level introduction to the issues and areas of law we will investigate over the semester. Key questions include: Why do companies do M&A deals? How are M&A deals done? What are the problems that arise from M&A deals, and how does the law address those problems?
Required Reading: N/A
Slide Deck: Introduction to M&A
Class recording: January 9
Supplemental Reading:
January 11 and 18, 2023 | Basics of Deal Structure
Today's class introduces us to the basic ways to structure a deal and explores some of the key legal implications behind that choice. We also work through the rather complicated transaction structure found in Capital Product's spin off of some of its tanker fleet.
Required Reading: HQS Chapter 2
Slide Deck: Deal Structures
Class recording:
Supplemental Reading:
Dell's 2010 Amended Certificate of Incorporation; Dell's 2013 Amended Certificate of Incorporation
Delaware's template certificate of merger for domestic corporations
January 23, 30 and February 1, 6 2023 | Basics of Valuation
These classes introduce basic accounting concepts that are frequently used in the valuation of companies, and we begin exploring common valuation methods. While a more complete treatment of these ideas is provided in a corporate finance class, we briefly cover them here because valuation issues are typically at the heart of M&A shareholder litigation and other disputes that arise in deals. We will also briefly discuss the role of investment bankers in the acquisition process.
Required Reading: HQS Chapters 9 and 10
Slides:
Class recordings:
Supplemental Reading:
February 6, 2023 | Designing an M&A Transaction: Preliminary Agreements
We begin our deep dive into the design of M&A agreements with an overview of important considerations in a sale process, and then we study the role preliminary agreements (such as NDAs and LOIs) play in that process.
Required Reading: HQS Chapters 12 and 13
Slides: Negotiating Merger Agreements Part I
Class Recordings:
Supplemental Materials:
February 8 and 13, 2023 | Designing an M&A Transaction: Architecture and Contingent Consideration
We now turn to understanding the key parts of the central contract in an M&A deal: The acquisition agreement. Our first day on this topic will focus on understanding the architecture of a merger agreement and how consideration is often designed.
Required Reading: HQS Chapter 14
Slides: Negotiating Merger Agreements Part II
Class Recordings:
Supplemental Materials:
February 13 and 15, 2023 | Designing a Merger Agreement: Representations & Warranties and Covenants
Now we focus on the long list of representations made in the merger agreement and the covenants that address pre-closing risk. Special attention is paid to the material adverse effect representation and definition, and how it interacts with other parts of the merger agreement.
Required Reading: HQS Chapter 14
Slides: Negotiating Merger Agreements Part III
Class recording: February 15
Supplemental Materials:
Jennejohn, Nyarko & Talley, Covid-19 as a Force Majeure in Corporate Transactions (2020)
Subramanian & Petrucci, Deals in the Time of Pandemic (2021)
Robert Miller, Material Adverse Effect Clauses and the Covid-19 Pandemic (2020)
Cleary Gottlieb, Operating in the Ordinary Course of Business After an Extraordinary Event (2014)
February 27 and March 1, 2023 | Designing the Merger Agreement: Closing Conditions and Termination Provisions
We conclude our review of the modern merger agreement with a discussion of closing conditions, including their connections to other provisions of the contract and their role in risk allocation, and termination provisions, including their various triggers and fee structures.
Required Reading: HQS Chapter 14
Slides: Negotiating Merger Agreements Part IV
Class recordings:
Supplemental Materials:
March 6, 2023 | Federal Securities Regulation in M&A: Schedule 13D and Preparing a Tender Offer
In this class we shift gears and explore an alternative method for accomplishing a transaction -- the tender offer -- with a particular focus on the federal securities regulations that apply. This discussion takes us through the requirements for making a tender offer and, of particular significance to later parts of the course, the role Schedule 13D plays in the strategy of hostile takeovers and defense measures.
Required Reading: HQS Chapters 4 and 5
Slides: Federal Securities Regulation in M&A
Class recording: March 6
Supplemental Materials:
March 8, 2023 | Defending the Corporation Against a Hostile Bid
In today's class, we explore the ways that a corporation can protect itself from hostile takeovers. This is, among other things, a lesson in legal innovation in the M&A market. The threat of corporate raiders in the 1970s and 1980s spawned a number of innovations, both contractual and organizational.
Required Reading: HQS Chapter 15
Slides: Hostile Takeovers
Class recording: March 8
Supplemental Materials:
Icahn's response to the Netflix pill (Nov. 5, 2012)
Marty Lipton reflects on the origins of the poison pill, among other things (2020)
March 13 and 15, 2023 | Fiduciary Duty Considerations for Boards Adopting Takeover Defenses
This part of the course builds upon our previous discussion of the mechanisms parties can use to defend against a hostile takeover. We now ask what limitations Delaware corporate law places upon boards adopting takeover defenses. The discussion begins with foundational cases, such as Cheff v. Mathes, Unocal, and Moran, and then takes us to the more recent Air Products v. Airgas and In re Williams decisions. We will learn that, while not entirely uninhibited, target boards have substantial leeway to adopt potent defensive measures.
Required Reading:
HQS Chapter 16
Slides: See slides for March 8
Class recordings:
March 15
March 20, 2023 | Fiduciary Duties of Boards When Selling the Corporation
We shift gears in today's class from a defensive posture to a board that has decided to sell the company. Focus will be on the classic Revlon and Smith v. Van Gorkum cases (which is covered in another chapter of the casebook -- I'll provide a summary on the safe assumption that your business organizations class taught you the case). The key questions will be: (1) when are Revlon duties triggered; and (2) what do those duties entail?
Required Reading: HQS Chapter 18
Slides: Selling the Corporation
Class recording: Make Up Class for March 20, 2023
Supplemental Materials:
March 22, 2023 | Resolving MAE Disputes
In today's class, we dive into the details of MAC/MAE litigation with a close read of the Hexion v. Huntsman case and an in-class review of the recent Akorn v. Fresenius and AB Stable cases.
Required Reading:
Please read the unedited version of Hexion v. Huntsman, 965 A.2d 715 (Del. Ch. 2008), which you can find on Westlaw/Lexis/Bloomberg, and prepare an outline of the main issues and sub-issues in the case.
Please read the introductions and skim the unedited versions of the Court of Chancery's decision in Akorn v. Fresenius, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), the Supreme Court's decision (Akorn v Fresenius, 198 A.3d 724 (Del. 2018)), and the Court of Chancery's decision in AB Stable.
Slides: MAE Litigation
Class recording: March 22
Supplemental Reading:
In re IBP Shareholders Litig, 2001 WL 675330 (Del. Ch. Jun. 18, 2001)
March 27, 2023 | Freezeouts
Today we review "freeze-out" transactions, the entire fairness standard, the harmonized treatment of mergers and tender offers in this area, and the role of procedural formalisms that may "cleanse" a deal sufficiently for business judgment deference to apply.
Required Reading: HQS Chapter 19 (until page 724)
Slides: Freezeouts
Class recording: March 27
Supplemental Materials:
Corporate Law Oral Histories Project at Univ. of Penn. Institute for Law & Economics:
March 29, 2023 | Deal Protections
In today's class, we review the different deals protections that parties may use to ensure the likelihood of closing, and we then consider Delaware precedents, such as Brazen and Omnicare, that apply to the use of deal protections.
Reading Assignment: HQS Chapter 16 (pp. 553-569)
Slides: Deal Protections
Class recording: March 29
April 3, 2023 | Regulatory Review of M&A Transactions
For the remainder of the course, we shift gears from Delaware corporate law and federal securities law to the various regulatory regimes that guide and constrain M&A activity. The primary regime upon which we will be focusing is antitrust law, particularly the notification process established by the Hart-Scott-Rodino Act and the substantive review of mergers under Clayton Act Section 7. Attention is also paid to multi-jurisdictional merger review, with the European Union's competition law as the primary subject. We will not confine our focus entirely to antitrust law, however. National security review (CFIUS, in the United States) is growing increasingly important, for instance.
In today's class, we will be undertaking a wide-ranging review of the U.S. antitrust system applicable to M&A activity. This discussion will set the stage for deeper dives into key issues, and for a simulation exercise later in the course.
Required Reading:
HQS Chapter 8
The chapter on Mergers in West's Antitrust Adviser (available on Westlaw) will also be useful throughout this portion of the course. You're not required to read it in its entirety, but I will direct your attention to key parts during this part of the course. In class today, I will show you where to find it on Westlaw.
Slides: Introduction to Merger Review
Class recording: April 3
Supplemental Materials:
April 5 and 10, 2023 | Merger Review Simulation
It isn't possible to replicate an entire antitrust class in a few class periods of this M&A course. As an alternative for building students' intuitions on the issues and analysis involved in merger review, we will work on a simulation exercise that unfolds over two class periods. One the first day, we will undertake a reportability analysis and substantive risk assessment, and on the second day we will negotiate the antitrust risk shifting provisions in the merger agreement.
The simulation involves a potential merger of two global mining companies. Mining is selected because the relevant product markets are fairly easy to understand, rough market shares can be calculated based on publicly available materials, and discrete divestiture remedies can typically be identified. And, of course, doing mining deals is the stuff of dreams.
Class recordings:
Required Materials (you do not have to review these closely before class -- just briefly familiarize yourself with their contents):
Supplemental Materials:
Relevant sections of West's Antitrust Adviser:
Thursday, March 31 and Tuesday, April 5: Sections 4.1, 4.2, 4.6, 4.8, 4.9, 4.21, 4.22, and 4.53
Tuesday, April 5: Sections 4.55, 4.56, 4.57, and 4.58
Antitrust Risk Shifting Provisions, Antitrust Unpacked (2018)
Antitrust Reverse Termination Fees, Antitrust Unpacked (Dec. 2020)
April 12, 2023 | Merger Review Policy
We conclude the semester with a high-level discussion of the policy implications of merger review -- a timely topic in current U.S. political economy. The substantive settings for this discussion include the antitrust review of mergers, which we have been focusing upon for the last two weeks, and national security review, which in the U.S. is handled by the Committee on Foreign Investment in the United States (CFIUS). The debates in both antitrust and national security policy raise important questions around the role of the state in the modern economy. For instance, should the consumer welfare standard, which has underpinned antitrust policy in the US for several decades, be amended or abandoned in favor of other interests? Is national security, for instance, one such alternative? How do these legal regimes fit within renewed calls for industrial policy (i.e., some form of state direction of economic activity)? Do our arguments differ for "tech companies" compared to enterprises in more traditional markets?
Required Materials:
Lina Khan, The End of Antitrust History Revisited (2020) (reviewing Tim Wu's The Curse of Bigness)
HQS Chapter 8
Slides: [To come]
Supplemental Materials:
Colleen Cunningham, Florian Ederer & Song Ma, Killer Acquisitions, J. Pol. Econ. (2021)
Lina Khan, The Separation of Platforms and Commerce, 119 Colum. L. Rev. 973 (2019)
April 14, 2023 | Review Session
Please find a recording of the review session here.
Assessment and Exam Materials
90% of students' final grades will be determined by a final exam. The remaining 10% of students' grades will be determined by participation during guest lectures.
The exam for the class will be administered as an electronic take-home exam. The standard time limit for the exam is three hours. The exam will be available at 8:00am (Mountain) on the first day of the exam period and will close at 10:00pm (Mountain) on the last day of the exam period. Further details on the 2023 exam will be sent to the class via email. For reference, the 2022, 2021, 2019 and 2017 exams are available below.