Americas M&A Newsletter Fall 2025

Preparing for a cloudy day – Advance notice bylaws since Kellner

Andrew Hammond and Camille Shepherd

Activist campaigns have become an increasingly common strategy for investors seeking to unlock shareholder value. M&A and other transactional-focused strategies have been a top driver of activist activity, with 45 percent of all activist campaigns in the past four years having some relationship to M&A activity¹. For example, activists have pushed corporations to unlock value by engaging in a sale process, merging with another company, or pursuing a breakup or divestiture. Such campaigns are often backed by the implicit threat that if the company does not adopt the activist's proposed strategy, the activist will seek to replace the board, either by persuading the current board to add the activist's candidates or by engaging in a proxy fight.

For those seeking to engage in a proxy fight, it is important to understand the corporation's advance notice bylaws, which have become commonplace in the corporate governance landscape. Advance notice bylaws require stockholders to provide advance notice of nominations and other proposals the stockholder seeks to present for vote during an annual meeting. With respect to elections of corporate directors, advance notice bylaws also often require the stockholders to disclose certain information about themselves and their director candidates. If a stockholder fails to comply with a corporation's advance notice bylaws, the corporation may seek to exclude the stockholder's nominations or proposals from consideration at the corporation's annual meeting.

The general purpose behind advance notice bylaws is to ensure a fair, orderly and well-informed vote at the annual meeting. Specifically, corporations enact such bylaws in order to ensure sufficient time to respond to shareholder nominations, and to allow the board to gather sufficient information to make informed recommendations to stockholders about nominees and matters subject to stockholder vote. While advance notice requirements can further legitimate corporate interests, certain bylaws that impose substantial disclosure requirements have drawn criticism on the basis that they unfairly circumscribe stockholders' ability to nominate and vote on directors and proposals. As a result, the adoption of increasingly robust disclosure requirements in advance notice bylaws has attracted the attention of both the plaintiffs' bar and institutional investors². In recent years, stockholders have brought legal challenges to the validity and enforceability of the disclosure requirements in advance notice bylaws. In addition, a number of institutional investors have enacted policies indicating that they will not support advance notice bylaws that are overly restrictive or burdensome on stockholders. Thus, corporate boards that enact bylaws with onerous disclosure requirements risk not only a legal challenge, but they also risk alienating their stockholder constituents, which may lead to stockholders casting votes against directors who adopt such measures.

With respect to legal challenges, the Delaware Supreme Court clarified the standard for evaluating advance notice bylaws in Kellner v. AIM ImmunoTech. In Kellner, a stockholder filed suit against AIM ImmunoTech (AIM) and its directors, alleging that AIM adopted an advance notice bylaw that made it impossible for Kellner to nominate directors. In evaluating AIM's bylaw, the Delaware Supreme Court explained that there are two types of challenges that can be brought against an advance notice bylaw—first a challenge to the legality of the bylaw (a facial challenge) and second, whether application of the bylaw is equitable (an equitable challenge).

In Kellner, the Court explained that in evaluating a facial challenge, advance notice bylaws are presumed to be valid and must be interpreted in a manner consistent with the law. In evaluating a facial challenge, the court must evaluate whether the bylaw is consistent with the company's certificate of incorporation, not prohibited by law and addresses a proper subject matter. To overcome the presumption of validity, prospective plaintiffs must carry the heavy burden of showing that the bylaw "cannot operate lawfully under any set of circumstances."³

With respect to equitable challenges, Kellner recognized that even if facially valid, an advance notice bylaw could still be unlawful if it would be inequitable to enforce under the principle that "inequitable action does not become permissible simply because it is legally possible." The Court went on to explain that if an advance notice bylaw is adopted in the face of a corporate election or implicates stockholders' voting rights in a contest for control, the advance notice bylaw will be evaluated under the enhanced scrutiny standard of review.⁴ This review consists of a two-step inquiry. First, the court will consider whether the board faced a threat to an important corporate interest or to the achievement of a significant corporate benefit when adopting the bylaw.⁵ If the board's actions are found to comply with step one, the court will consider whether the board's response to the threat was reasonable to the threat posed. Even if a board is motivated to counter a legitimate threat, courts have the discretion to impose an equitable remedy limiting the enforceability of the bylaw if the board's response is disproportionate to the threat posed.

After clarifying the appropriate standard of review, the Delaware Supreme Court found that AIM's adoption of a bylaw that required stockholders to disclose significant information relating to arrangements, agreements or understandings relating to a director nomination did not "further [the] AIM board's stated purpose of preventing stockholders from... evading the Amended Bylaws' disclosure requirements... suggesting an intention to block the dissidents' effort." Specifically, the Court concluded that the AIM board adopted one "unintelligible" bylaw and three unreasonable bylaws for the primary purpose of interfering with Kellner's nomination notice, rejecting his nominees and maintaining control. As such, the Court found such bylaws to be inequitable and therefore unenforceable.⁶ Nevertheless, the Court ruled that although the bylaws were unenforceable, Kellner would not receive any relief due to his own deceptive conduct.

Since the issuance of the Kellner decision, the Delaware Court of Chancery has considered several challenges to advance notice bylaws, and has further clarified the circumstances under which stockholders may bring such challenges.

In Siegel v. Morse, a stockholder alleged that the AES board breached its fiduciary duty by adopting an advance notice bylaw because it "inequitably chilled the fair exercise of the... stockholders' franchise."⁷ Plaintiff Siegel challenged two features of the AES advance notice bylaws: the acting-in-concert definition and the ownership provision.⁸ Vice Chancellor Cook considered Siegel's "as-applied" challenge to the AES advance notice bylaw, and dismissed the breach of fiduciary duty claim finding that the challenge was not ripe. In particular, the court found that the plaintiff did not allege that any stockholders were deterred by the advance notice bylaw from nominating a director for election. VC Cook observed that "Plaintiff does not cite to a single case where this Court has allowed a stockholder to challenge the enforceability of an advance notice bylaw when no stockholder at least is considering or intends to run a proxy contest."⁹ VC Cook further found that the board's decision to revise the company's bylaws in response to the Universal Proxy Rule is not the kind of circumstance that the Supreme Court "envisioned... would trigger the machinery of equitable review."¹⁰

Similarly, in Assad v. Chambers, plaintiff Assad challenged two features in Owens Corning's advance notice bylaws that were enacted following the SEC's adoption of the Universal Proxy Rule: the "Acting in Concert" definition and the "Ownership Provision." As in Siegel, the court observed that plaintiff did not have any interest in running a proxy contest and did not allege that any of the challenged disclosure requirements would apply to him if he were to submit a nomination. VC Cook dismissed the claim as unripe, noting that "[w]ithout a proxy contest, or even a stockholder saying she is chilled from making a nomination, generic references to stockholder activism contained in committee materials and meeting minutes do not transform this dispute from an 'imagined' one to a 'real-world' one."¹¹

In Vejseli v. Duffy, stockholders of Ionic Digital, Inc. (Ionic) challenged, among other things, the board's rejection of a director nomination notice for failing to disclose certain agreements that were called for by Ionic's advance notice bylaws.¹² The plaintiffs argued that they did not have to disclose the agreements because the agreements were no longer operative at the time the nomination notice was provided. In evaluating plaintiffs' argument, the court noted that "disclosing 'agreements, measures, or plans taken towards a common end' is critical not only because 'there are legitimate reasons why the Board would want to know whether a nomination was part of a broader scheme relating to the governance, management, or control of the Company,' but also because such information 'is important to stockholders in deciding which candidates to support.'"¹³ Ultimately, the court found that even if plaintiffs were only required to disclose extant agreements, plaintiffs' failure to disclose a material provision in a "terminated agreement that expressly survived termination" provided the board with a sufficient basis to reject the nomination notice. The court further concluded that the Ionic board's rejection of the nomination notice was not inequitable, finding that the board appropriately concluded that the stockholders' failure to disclose the agreements threatened the board's legitimate objective of ensuring an informed stockholder vote. The court also rejected plaintiffs' argument that the Ionic board acted inequitably by failing to provide plaintiffs with an opportunity to supplement their nomination notice before the nomination window closed. Specifically, the court held that since the nomination window closed two days after plaintiffs submitted the nomination notice, the board's failure to respond sooner did not amount to "manipulative conduct."

In Carroll v. Burstein, a stockholder challenged the facial validity of a bylaw adopted by Stoke Therapeutics, Inc. (Stoke) that required nominating stockholders to disclose, among other things, associated persons on whose behalf the nomination was made. As no stockholder had sought to nominate a director candidate, plaintiff acknowledged that the board was not faced with an imminent threat of stockholder activism or a proxy contest, and challenged only the facial validity of the bylaw. While finding that the facial challenge was "ripe," Vice Chancellor Will quickly dispensed with plaintiffs' challenge. In response to plaintiff's efforts to overcome the presumed validity of the bylaw with "hypotheticals or speculation on whether the bylaw might be invalid under certain circumstances,"¹⁴ Vice Chancellor Will found that the mere existence of a circumstance where the bylaw could lawfully operate vitiated such claim. Carroll thus underscores the difficulty plaintiffs will face when making a facial challenge to the enforceability of an advance notice bylaw.

And most recently, in Wright v. Farello, a stockholder filed an action seeking declaratory relief challenging the facial validity of the Better Home & Finance Holding Company's (Better Home) advance notice bylaws, alleging that the disclosure requirements in the advance notice bylaws were unintelligible and impossible to comply with.¹⁵ Among other things, the advance notice bylaws required stockholders to disclose any "Associated Person" with whom the person nominating a director candidate was acting in concert with. The definition of "Acting in Concert" included a daisy chain provision providing that "a person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person." In evaluating plaintiff's claim, Chancellor McCormick started from the principle, outlined in Kellner, that an unintelligible bylaw is invalid, and went on to analyze whether the rule had crossed the line from hard-to-understand to unintelligible. While recognizing that the breadth of the bylaw was "quite broad" and "a lot to take in" covering an "expansive set of conduct," the Chancellor concluded that "with a good bit of work, a stockholder can comprehend them." In addressing plaintiff's claim that the daisy chain provision requires nominating stockholders to disclose persons unknown to them, the Chancellor concluded that the bylaw "imposes an investigative burden" requiring the nominating person to ask the people with whom she is Acting in Concert whether they are Acting in Concert with anyone else. While the Chancellor recognized that this investigative burden is "onerous" and that a stockholder might take issue with that requirement as burdensome to the point of unreasonable, the Chancellor explained that the court does not assess reasonableness when evaluating a facial challenge. Ultimately, the Chancellor concluded that the plaintiff failed to demonstrate that the bylaw was unintelligible or incapable of operating lawfully in any circumstances, and dismissed plaintiffs' facial challenge to Better Home's advance notice bylaws.

Given the number of legal challenges, the Delaware courts, rather than actors in private markets, have been defining the acceptable legal limits of disclosure requirements contained in advance notice bylaws. But the fact that a court may find an advance notice bylaw legally permissible does not mean that such bylaw serves the best interests of the corporation or its stockholders. Mere legality is a low hurdle to clear. Indeed, as the Chancellor observed in Wright, there were many reasons why the advance notice bylaw there at issue was "suboptimal" even though it was not facially invalid. We expect that stakeholders will ultimately demand more of corporate boards that adopt advance notice bylaws. Over time, we expect that institutional investors will develop and express preferences on the terms contained in advance notice bylaws, and a market standard will emerge. As institutional investors stake out these positions, the terms contained in advance notice bylaws will be more heavily influenced by developments in the commercial marketplace rather than the courtroom. In this environment, corporations will have to evaluate whether the terms they are proposing to adopt are commercially acceptable in addition to whether they are legally permissible. Corporate boards that adopt "suboptimal" advance notice bylaws that are inconsistent with market practices will risk alienating large stockholder constituencies.

As a market consensus has yet to emerge, the Delaware courts' decisions regarding advance notice bylaws issued since Kellner provide useful guidance for boards seeking to adopt or amend a corporation's advance notice provisions.

First, given the increase in shareholder activist activity, boards should be proactive in assessing advance notice provisions and evaluate whether it is appropriate to adopt or make reasonable amendments to advance notice provisions. Corporations should evaluate whether to adopt or amend such bylaws on a "clear day" before any activist threat has emerged to best position the bylaw in the event of a legal challenge, so that the bylaw is not treated as a defensive measure subject to the enhanced scrutiny standard of review. However, even adopting a bylaw that imposes onerous disclosure requirements on a "clear day" will not insulate that bylaw from an "as applied" challenge that will assess, among other things, whether the board engaged in any inequitable conduct in enforcing the bylaw. Moreover, adopting a bylaw containing overly onerous disclosure requirements could potentially affect the corporation's relationship with institutional shareholders. As such, corporations should carefully consider whether there is a logical fit between the disclosure requirements sought in the advance notice bylaw and the goal of enabling stockholders to make informed decisions.

Second, bylaws should be drafted as clearly as possible so that they are easy to understand. Courts will resolve any ambiguity in favor of the stockholder's electoral rights. Bylaws that are excessively long and confusing could face a facial challenge to the extent they are deemed unintelligible.

Third, a board should adopt advance notice bylaws that are well reasoned and designed to enhance board decision-making and ensure transparency regarding nominees so that stockholders are able to cast well-informed votes. The board should document its reasons for adopting advance notice bylaws in minutes to ensure there is a contemporaneous record demonstrating that the board was motivated to act for legitimate reasons and not for any prohibited purpose.

The Delaware courts' recent decisions are also instructive for stockholders considering making their own proposals or nominating candidates for director.

First, it is important to plan ahead. Review bylaws well in advance to ensure there is sufficient time to collect and report information necessary to satisfy disclosure requirements.

Second, disclose information to the best of your ability. Given that stockholder nominees risk being excluded from the corporate ballot unless they comply with the advance notice provisions, stockholders should make a good faith effort to fully comply with advance notice disclosure requirements and provide all information reasonably requested.

Third, submit nomination notices early. As most corporate bylaws provide a window for stockholders to submit nomination notices, those considering nominating director candidates should strive to submit nomination notices sufficiently in advance of the deadline to allow time to cure any deficiencies in the submission identified by the corporation.

Fourth, given the recent case law, stockholders considering bringing litigation challenging the application of a bylaw should consider waiting until a dispute has crystallized and questions concerning enforceability arise in a "more concrete and final form" before bringing an equitable challenge before the courts. Without a live dispute, plaintiffs risk their "as applied" equitable challenges being dismissed as unripe.

_{1 Q3 2025 Review of Shareholder Activism, Barclays Shareholder Advisory Group.
2 A number of these challenges were made to advance notice bylaws that were adopted after the Securities and Exchange Commission enacted rules requiring the use of a single "universal" proxy card in connection with contested elections of directors. Many corporations amended and updated their bylaws to ensure their bylaws were consistent with the new SEC rules.
3 Kellner v. AIM ImmunoTech Inc., 320 A.3d 239, 258 (Del. 2024).
4 Advance notice bylaws that are adopted on a "clear day" (when the board is not facing an imminent threat to corporate control) will be evaluated under the deferential business
judgment standard of review. However, if a board waits until there is an imminent threat (i.e., a "cloudy day") to adopt an advance notice bylaw, the court will evaluate the bylaw under
the enhanced scrutiny standard. See, e.g., Coster v. UIP Cos, 300 A.3d 656, 671 (Del. 2023).
5 The threat must be real and not pretextual and the board's motivation must be proper and not selfish.
6 Id. at 267.
7 Siegel v. Morse, No. 2024-0628-NAC, 2025 WL 1101624, at *7 (Del. Ch. Apr. 14, 2025).
8 The AES Bylaws required the nominating person to disclose "compensation or reimbursement of parties acting in concert between the nominating person and each proposed nominee, his or her respective affiliates and associates, or others acting in concert therewith." In addition, there was a daisy chain provision requiring the nominating stockholder to disclose the identity of persons acting in concert with any person the nominating stockholder was acting in concert with. The Ownership Provision required disclosure of, among other things, any equity interest in the Company along with their history of ownership of stock or derivative interest in the Company and instructed nominating stockholders and anyone they are acting in concert with to disclose "any performance related fees they would receive should the Company's stock appreciate or depreciate." Siegel v. Morse, 2025 WL 1101624, at *6.
9 Id. at *6.
10 Id. at *7.
11 Assad v. Chambers, No. 2024-0688-NAC, 2025 WL 1554609, at *4 (Del. Ch. Jun. 2, 2025).
12 Vejseli v. Duffy, No. 2025-0232-BWD, 2025 WL 1452842 (Del. Ch. May 21, 2025). In addition to challenging the board's rejection of the nomination notice, plaintiffs also challenged the board's adoption of a "Board Reduction Resolution" which reduced the number of directors up for election a little more than a month in advance of the annual meeting. The Court found
that as the Board Reduction Resolution was adopted in the face of a "mounting proxy contest" it was not adopted on a "clear day" and thus applied enhanced scrutiny in evaluating the resolution. The court concluded that the board failed to prove that the Board Reduction Resolution "was adopted for a valid, non-pretextual corporate purpose" in part because there was
no "contemporaneous record" supporting the principal justifications offered in the litigation for adopting the resolution.
13 Vejseli v. Duffy, 2025 WL 1452842, at *15 (quoting Jorgl v. AIM ImmunoTech Inc., 2022 WL 16543834, at *16 (Del. Ch. Oct. 28, 2022)).
14 Carroll v. Burstein, No. 2024-0317-LWW, 2025 WL 2446891, at *7 (Del. Ch. Aug. 25, 2025)
15 Wright v. Farello, No. 2024-0306-KSJM (Del. Ch. Oct. 27, 2025).}

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Exxon Mobil’s novel retail voting program: The future of shareholder voting?

Erica Hogan, Nicholas Luciano and Edward Ernst

On September 15, 2025, the Office of Mergers and Acquisitions of the SEC's Division of Corporation Finance, granted a no-action request from Exxon Mobil Corporation (Exxon) permitting a novel approach to retail shareholder voting. Specifically, the SEC agreed that it would not recommend enforcement action if Exxon implemented a retail voting program allowing retail shareholders to provide standing instructions for their shares to be voted automatically in line with the board of directors' recommendations at each shareholder meeting. This could potentially be an important shift for many public companies, where low voter turnout can have significant consequences for critical proposals, such as approval of corporate transactions or in contested director elections. A retail voting program with standing voting instructions could address this participation gap and potentially alter the balance of power in public company proxy voting.

Background

Public companies hold annual shareholder meetings at which shareholders can vote on both management and shareholder proposals related to important company matters. However, many shareholders, including most retail investors, do not vote at such meetings, often because they lack the time and resources to thoroughly evaluate each proposal or otherwise perceive that effort to outweigh the benefit of participation (i.e., "rational apathy"). In particular, Exxon's no-action request noted that nearly 40 percent of the company's outstanding shares were held by retail investors, but only 25 percent of those shares were voted at its last annual meeting.

Low voting participation rates by retail shareholders effectively amplify the influence of institutional and activist investors, who vote at much higher rates, and can also result in important proposals being approved or not by narrow margins.

Exxon's no-action request also pointed out that 90 percent of the retail shareholders who did vote at meetings over the past five years supported all the board's recommendations, and that the company had "long received feedback" from retail shareholders that they would be amenable to standing voting instructions to vote as the board recommends.

Key elements of Exxon's retail voting program

The no-action letter states that the SEC will not recommend enforcement under Rules 14a-4(d)(2) or 14a-4(d)(3) of the Securities Exchange Act of 1934¹ with respect to the implementation of Exxon's retail voting program if it aligns with the conditions and requirements set forth in the company's letter to the SEC, including the following:

• Cost and eligibility: The program will be offered at no cost to all retail investors, including both registered owners and beneficial owners. Every eligible investor will have an equal opportunity to enroll.²
• Scope of the opt-in: Participating shareholders who opt in to the program can choose a standing voting instruction for either (i) all matters, or (ii) all matters except contested director elections or any corporate action that would require shareholder approval under state law or stock exchange rules.
• Right to opt-out: Shareholders enrolled in the program must have the right to withdraw or change their standing voting instructions at any point without any fees; however, such withdrawals will only affect voting at future meetings for which the company has not yet filed a definitive proxy statement.³ Shareholders enrolled in the program will always have the right to choose to cast their own votes using the company's proxy materials if they wish to override the standing instruction.
• Annual reminders: The company must send annual reminders to participants notifying them that they are enrolled in the program and have given standing voting instructions, including explicit language informing participants that they have the ability to opt out for future meetings.
• Public disclosure: The company must describe the program and any material changes thereto in proxy materials filed with the SEC, on its website, and in its proxy statement sent to all shareholders.
• Voting mechanics: Exxon's vote-processing agent will manage the voting process and related administrative tasks, and facilitate communication between the company, shareholders, brokers and banks.

Key takeaways/considerations

• Consider composition of shareholder base: Companies that are contemplating implementing a similar program should carefully consider their own shareholder base and its voting behavior. A company with a significant concentration of votes with several large institutional shareholders may find that the retail program will not substantially impact voting outcomes. In addition, companies with significant turnover in their retail investor base may have a more difficult time maintaining an effective retail voting program if they must continually monitor and enroll new shareholders. Companies should carefully consider the need to invest additional time, money and resources—and weigh those potential costs—when deciding whether to adopt a retail voting program.
• Consider shareholder perceptions: Companies should consider how such a retail program might be received by their shareholders before adopting the program. In the absence of any meaningful guidance from proxy advisors and large institutional shareholders, companies should consider engaging with their shareholder base, including their retail shareholders (as Exxon did), in determining whether introducing such a program is appropriate.
• Draft proxy to comply with state law: Under Section 212(b) of the Delaware General Corporation Law, a proxy is only valid for three years "unless the proxy provides for a longer period." Therefore, proxies to be granted under a retail voting program should specify that the proxy remains in place until the proxy giver opts out of the program. In addition, under Delaware common law, a proxy is revoked either by (i) a later dated proxy or (ii) the proxy giver voting the shares at a meeting. Consequently, to ensure that a standing instruction survives any single override due to a subsequently voted proxy, the terms should provide that such action does not revoke any standing instructions already in effect. Companies should carefully review the applicable state law requirements if they are not incorporated in Delaware.
• Confer with SEC staff before proceeding: Companies wishing to proceed with a similar program in reliance on the SEC's no-action letter should speak with the SEC staff before proceeding and may need to seek their own no-action relief if their program differs materially from Exxon's contemplated program.
• Evaluate the costs associated with implementation: There are necessary expenses associated with the rollout of a retail voting program. These include annual marketing expenditures tied to communications with registered shareholders and beneficial owners (e.g., annual reminders to enrolled participants of their standing voting instructions). Companies will need to weigh these expenses against the number of shareholders (and the associated number of shareholder votes they hold) that can be expected to sign up for the program and evaluate whether implementation presents a valuable use of corporate resources.

Implications for M&A

• Enhanced retail voting participation: Exxon's retail voting program may increase participation from retail shareholders by automatically aligning their votes with board recommendations. This could significantly increase retail investor involvement in corporate decisions, particularly in M&A scenarios.
• Strategic advantage: A retail voting program could provide a strategic advantage in securing a favorable outcome with respect to obtaining shareholder approval for M&A transactions.
• Precedent setting: The no-action letter may set a precedent for other companies to adopt similar voting programs in the future. If the implementation of the Exxon program is successful, then other companies may be motivated to follow suit.

Implications for shareholder activism

• Impact on activist influence: The automatic voting mechanism may reduce the influence of activist shareholders by effectively locking in retail votes in favor of the company.
• Challenges for activists: Activists could face greater challenges in contested director elections and in proposing and passing shareholder resolutions.
• Regulatory landscape: The no-action letter highlights evolving regulatory views on shareholder voting, potentially leading to increased scrutiny of voting rights and shareholder engagement.

In summary, Exxon's SEC no-action letter introduces a new approach that could reshape shareholder engagement by providing strategic advantages in M&A scenarios while further influencing the dynamics of shareholder activism.

_{1 Which prohibit a proxy from conferring authority to vote at any annual meeting other than the next one or to vote for more than one meeting.
2 Exxon plans to communicate directly with registered owners, while communications with beneficial owners will be conducted indirectly through their respective banks, brokers and/or agents.
3 For those shareholders who choose a standing voting instruction for all matters, Exxon will provide additional notices ahead of meetings involving contested board elections or significant corporate transactions, offering another opportunity to cancel or adjust their voting preferences.}

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GP stakes investing: Strategic M&A in the asset management industry

Trevor Currie, Leslie Blanco and Abigail Clemons

Highlight: GP stakes as a strategic M&A play

GP stakes investing, the acquisition of a minority equity interest in an asset management firm (the General Partner, or GP), has emerged as a sophisticated form of strategic M&A. Unlike traditional Limited Partner (LP) commitments to a fund, GP stakes investors acquire an interest in the GP's corporate entity itself. This entitles them to a share of management and performance fees, typically under the "2 and 20" model (2 percent annual management fee and 20 percent carried interest).

This approach offers investors exposure to the broader economics of the firm's platform, not just the returns of a single fund. GP stakes investing generates fee-based, recurring income and provides alignment with long-term growth in private markets, while allowing GPs to raise permanent capital, fund growth or facilitate succession planning.

GP stakes investing is a growing form of strategic M&A, offering investors exposure to long-term fee-based revenue, and GPs a path to capital and growth.

Historical landscape: From founder-owned to institutional capital

The roots of GP stakes investing trace back to the early private equity model in the 1980s and 1990s, when firms like KKR, Blackstone, Carlyle and TPG were founder-owned partnerships. GP equity was typically held by a small group of senior partners, with limited external participation.

As the private markets matured, founders began to seek liquidity or external capital to scale operations. The 2000s and 2010s marked a turning point, with the institutionalization of GP stakes as an investable asset class. Dedicated platforms such as Dyal Capital Partners (now part of Blue Owl Capital), Goldman Sachs Petershill and Blackstone Strategic Capital Holdings pioneered the model of acquiring passive, minority stakes in leading GPs.

Today, GP ownership is more fragmented. Institutional investors, sovereign wealth funds, insurance companies, family offices and even LPs are acquiring GP stakes to gain exposure to fee streams, multiple fund vintages and diversified strategies. GP equity is increasingly viewed as a corporate asset class; one that can be valued, monetized and scaled.

Deal structuring and legal considerations

From an M&A legal perspective, GP stakes transactions present a unique combination of strategic and technical considerations. Investors typically receive robust minority protections, such as board observer rights, access to information and vetoes over key corporate matters. Many transactions also incorporate preferred or structured equity features designed to align incentives and mitigate downside risk. Valuation presents another layer of complexity, as assessing the worth of a GP requires projecting future management and performance fees, carried interest and overall platform growth, often involving sophisticated financial modeling.

Governance and control dynamics are equally significant; although investors generally hold minority positions, they frequently negotiate for influence over key business decisions, succession planning and liquidity events. In addition, these transactions often demand intricate tax structuring, particularly regarding carried interest, and strict compliance with SEC and other regulatory regimes.

Overall, GP stakes deal structuring is complex, and these deals sit at the intersection of private equity, corporate M&A and fund governance, requiring legal advisors with deep cross-disciplinary expertise.

Current market dynamics: Platform-building and strategic growth

The rise of dedicated GP stakes platforms has reshaped the private markets M&A landscape. Rather than one-off liquidity deals, many investors are using GP stakes as a launchpad for strategic expansion.

Recent examples include:

• Blue Owl Capital's acquisition of a minority stake in Oak Hill Advisors (2021), which helped expand its credit platform.
• Ares Management's investment in Crestline Investors (2023), enabling exposure to credit and opportunistic strategies.
• Petershill Partners' 2021 IPO on the London Stock Exchange, offering public investors exposure to GP stakes and fund economics.

These transactions demonstrate how GP stakes investing facilitates platform growth, product diversification and global expansion with clear parallels to corporate M&A strategies.

The competitive landscape for GP stakes investing continues to evolve, as different types of buyers target distinct segments of the market. Large private equity platforms are increasingly focused on acquiring stakes in established, institutional-grade GPs, while smaller investors and family offices tend to concentrate on emerging managers and sector-specific firms. Despite market volatility, demand for these investments remains strong, driven by the defensive nature of management fee income and the potential for long-term value creation. Additionally, a growing number of limited partners are seeking exposure to GP-level economics, further blurring the line between traditional capital providers and strategic investors.

Dedicated GP stakes platforms are driving industry consolidation, fueling a wave of corporate-style growth in private markets. The market's resilience in volatile times makes GP stakes investing a favored strategy among long-term allocators and dealmakers alike.

Regulatory and fiduciary considerations

As the GP stakes market continues to expand, it has attracted increasing regulatory scrutiny, particularly from the SEC. A central area of focus is fee transparency and the potential for conflicts of interest, as regulators emphasize the importance of clear disclosure regarding fee-sharing arrangements and the relationship between GP stake investors and limited partners. Another concern involves fiduciary duty misalignment, since GP stakes investors are not fiduciaries to LPs, which can raise governance challenges in situations of underperformance or strategic disagreement. Additionally, valuation oversight has become a priority, with regulators closely examining how management fee streams and carried interest are valued, especially when stakes are marked up without corresponding realized performance. In this evolving environment, legal advisors play a critical role in guiding clients through an increasingly complex regulatory framework shaped by new SEC rules and heightened LP activism.

Future outlook: Consolidation, expansion and cross-border deals

Looking ahead, GP stakes investing is expected to remain a key driver of M&A activity within the asset management industry. The market is likely to see continued consolidation among mid-market GPs, as larger platforms acquire minority or even controlling stakes in smaller managers. Expansion into adjacent asset classes such as private credit, infrastructure, real assets and secondaries is also anticipated, broadening the scope of investment opportunities. Cross-border transactions, particularly in Europe and Asia, are becoming more common, and will require sophisticated legal structuring and regulatory coordination across jurisdictions. In addition, secondary sales of existing GP stakes are emerging, as early investors seek liquidity or portfolio rebalancing opportunities. Generational transitions at established GPs are also prompting partial sales to institutional backers seeking to provide long-term stability. As fund managers increasingly operate in a corporate-like manner, the lines between fund sponsor, strategic acquirer and institutional investor continue to blur, ensuring that GP stakes investing remains at the intersection of capital formation, corporate finance and M&A.

_{1 https://pitchbook.com/blog/what-is-gp-stakes-investing
2 https://prfirmpwwwcdn0001.azureedge.net/azstgacctpwwwct0001/uploads/57b7cdb92e1797cb8733039dcaa1dc50.pdf 
3 https://am.gs.com/en-us/advisors/products/general-partner-stakes
4 https://www.caisgroup.com/articles/an-introduction-to-gp-stakes
5 https://www.ey.com/en_lu/insights/private-equity/the-rise-of-gp-stakes-investing
6 https://www.blueowl.com/insights/anatomy-gp-stakes-fund-investment-all-seasons#jump-gp-stakes-overview
7 https://www.privatecapitalsolutions.com/insights/investing-in-investors-fund-manager-m-and-a-from-gp-stakes-to-strategic-acquisitions
8 https://meketa.com/wp-content/uploads/2023/06/MEKETA_GP-Stakes-Investing.pdf
9 https://cazinvestments.com/strategy/gp-stakes/}

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Regulatory risk allocation in recent US power and utilities M&A deals

Market trends in regulatory efforts, termination fees, control over process, filing deadlines and outside dates

Thomas Christopher, Dilara Erik, Alexis Ko and Aparajita Pande

This article provides a comparative analysis of the principal regulatory covenants and related provisions in six recent significant M&A transactions in the US power and utilities sector.¹ The transactions are part of an accelerating series of transactions in the US power generation and utilities sector, driven by the increasing demand for power due to (among other things) AI, data centers generally, the electrification of the transportation system and the onshoring of manufacturing, combined with the relatively uneconomic cost of building new power plants, and the length of time needed to construct and bring the plants online.

I. Required efforts and limitations, and exceptions thereto

A. General efforts obligations

In all the transactions, each principal party is under an obligation to use its "commercially reasonable efforts" or "reasonable best efforts" to satisfy the closing conditions and consummate the transaction. In each deal, these conditions include the absence of any injunction, law or other legal restraint that restricts or prohibits the transaction, and the receipt of a specified list of regulatory approvals (which in some cases are set forth on a schedule that is not publicly available).

In five of the transactions analyzed, the buyer's "reasonable best efforts" obligations are expressly defined to include certain actions, including defending against legal or regulatory challenges, proposing and effecting sales, divestitures, or other dispositions of assets or businesses, modifying or waiving contractual or business relationships, and accepting limitations on future conduct or operations. Each of these provisions also contains a catch-all requirement to take any other action requested by governmental authorities to facilitate the closing. Such obligations generally extend to the buyer's affiliates, except in one transaction, where only the obligation to accept limitations on conduct applies to the buyer's affiliates. As discussed in detail below, however, in each of the transactions, the buyer's obligations to take actions or agree to remedial measures to obtain regulatory approvals is subject to some form of limitation and/or some exceptions.

B. Limitations and exceptions to efforts obligations

Although the buyer in each transaction is under an obligation to use extensive efforts, including in most cases taking a litany of specific actions to obtain all regulatory approvals necessary to consummate the transaction, in each case, this obligation is subject to some limitation and/or exceptions that effectively serves to allocate the regulatory risk between the buyer and the seller to one degree or another. In other words, none of the transactions includes a so-called "hell or high water" covenant that places all the regulatory risk on the buyer by requiring the buyer to take any and all actions necessary to obtain such regulatory approvals regardless of the impact that doing so may have on the buyer and/or the buyer and the target entity or assets on a consolidated basis.

Specifically, in two of the transactions the buyer is relieved of its obligation to take any action or agree to remedial measures if doing so would result in a "burdensome condition." In one of these transactions, "burdensome condition" is defined as (a) any remedial action or requirement imposed by a governmental authority in connection with the transaction that would, or would reasonably be expected to, have, individually or in the aggregate, a material adverse effect on the business, assets, liabilities, financial condition or results of operations of the buyer, the target and their respective subsidiaries (taken as a whole), measured as if they were a single consolidated group with the same size and scale as the target and its subsidiaries as of the date of the agreement; (b) any requirement to sell, divest, hold separate, or otherwise transfer certain specified assets to a third party; or (c) any requirement to terminate, modify or waive arrangements related to those specified assets if such actions would have more than a de minimis impact on those specified assets or on the buyer and its affiliates. This transaction includes specific examples of limitations and restrictions that would exceed the de minimis standard. In this transaction, the buyer, which is a financial buyer, and its affiliates are also not required to agree to remedial measures affecting certain affiliated funds or identified sponsor investors.

In the second transaction, "burdensome condition" is similarly defined to include any remedial action that would (a) individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), business, or results of operations of the buyer, the target and their respective affiliates, taken as a whole; or (b) require the buyer to terminate, modify or waive significant relationships, contracts or arrangements relating to certain specified assets. Unlike the other transactions, the principal transaction document in this deal further provides that if the buyer reasonably determines that a remedial action constitutes a "burdensome condition," the parties are required to confer in good faith to explore means to avoid or mitigate the condition, and to negotiate any necessary amendments to the transaction documents or related transactions to substantially eliminate or sufficiently mitigate the condition, while continuing to satisfy applicable regulatory obligations.

In two of the other transactions, the parties expressly agree that the buyer's and its affiliate's "reasonable best efforts" obligations do not require them to take any action with respect to certain assets identified in a schedule.

In another transaction, the parties expressly exclude a broad array of remedial actions from their "commercially reasonable efforts" obligations. These excluded actions for the buyer and its affiliates include proposing, negotiating, committing to or effecting the sale, divestiture or disposition of any businesses, product lines, equity securities or assets of the buyer, its affiliates, the seller or the target, as well as any post-closing actions that would restrict their freedom of action or ability to retain these interests. Similarly, none of the parties or their respective affiliates are required to contest, defend or resist any legal proceeding seeking to block the transaction or to attempt to overturn any judgment that would prevent or restrict the closing of the deal. The breadth of the excluded actions of the buyer and its affiliates renders this an unusually buyer-friendly provision, which presumably reflects the buyer's bargaining leverage in the transaction.

In three of the transactions, the seller and/or the target is prohibited from taking any remedial action without the buyer's prior written consent, ensuring that the buyer maintains control over remedial actions that could affect the transaction or the post-closing business. In two other transactions, a remedial measure imposed on the target requires the buyer's written consent only if it constitutes a "burdensome condition." In all the transactions, the buyer is not required to take any remedial action that is not conditioned on the consummation of the transaction.

Finally, all the transactions except one impose on the buyer a "clear skies" covenant requiring the buyer and its affiliates to refrain from taking any action that would materially delay, hinder or prevent the closing of the transaction. In some cases, this covenant expires after a specified term, while in other cases, it is limited to specific markets. One agreement also imposes similar restrictions on the seller.

II. Regulatory termination fees

Each of the transactions includes a regulatory termination fee payable by the buyer to the seller or the target in the event the failure to obtain required regulatory approvals prevents the consummation of the transaction. These fees are primarily intended to incentivize buyers to satisfy their contractual obligations to obtain the necessary regulatory approvals and to provide sellers with a predetermined amount of liquidated damages in the event such approvals are not obtained.

In the transactions analyzed, these fees range from 1.7 percent to 6.7 percent of the target's enterprise value. Notably, as the enterprise value of the transaction increases, the termination fee as a percentage of the enterprise value generally decreases, presumably reflecting the buyer's refusal to accept a termination fee that is too great in absolute terms, and the acceptance by the seller or target that the negotiated amount is sufficient to achieve the fee's intended purposes.

Regulatory termination fee triggers in the transactions generally include: (i) failure to close the transaction by the outside date, provided all non-regulatory conditions have been satisfied or waived; (ii) issuance of a final, non-appealable order prohibiting or restricting the transaction (in three transactions, the order must specifically relate to the required regulatory approvals, narrowing the circumstances in which the fee is payable); or (iii) a material breach by the buyer of its obligations to obtain all necessary regulatory approvals that prevents satisfaction of the regulatory-related closing conditions.

In one of the transactions analyzed, the parties further agree that the buyer is not required to pay the regulatory termination fee if certain regulatory approvals are not obtained primarily due to a breach by the seller or its affiliates of their obligations under a "clear skies" covenant imposed on them.

In each transaction, the seller's right to receive the termination fee is the sole and exclusive remedy in the event of termination that requires the payment of the fee by the buyer to the seller.

III. Control over the regulatory approval process

The transactions analyzed generally require the buyer and the seller to cooperate and consult with each other throughout the regulatory approval process. Each principal transaction document sets forth the obligations of both parties with respect to meetings and other substantive communications with regulatory authorities, including their obligations to allow the other party and/or its representatives to participate in meetings and discussions with regulators, and to consider in good faith the other party's views with respect to regulatory filings.

However, the allocation of control over regulatory strategy varies across the transactions. In four of the transactions analyzed, the buyer has primary authority over the regulatory process, including the timing and content of filings and responses to regulatory inquiries. While the buyer is obligated to consult with the seller and give due consideration to the seller's views in good faith, the buyer retains ultimate decision-making authority.

By contrast, one of the transactions establishes a structured consultation process in which the buyer and seller jointly develop and consult on filings, analyses, communications, presentations and other actions related to obtaining regulatory approvals, considering each other's views in good faith. This consultation obligation does not apply to proposals made to regulatory authorities regarding remedial actions the buyer is required to take to secure approvals. Notably, if a disagreement arises over whether to take any regulatory action, its timing or any aspect of it, the buyer's position prevails, ensuring that ultimate authority and practical control reside with the buyer. Another transaction adopts a hybrid approach. Both parties are required to collaborate with each other to establish the overall regulatory strategy and to coordinate filings, and must act in good faith to consider each other's views. Control over Hart-Scott-Rodino (HSR) filings and related strategy, however, remains with the buyer following consultation with the seller, while responsibility for other regulatory approvals is shared.

Overall, the transactions illustrate an emphasis on cooperation and good-faith consultation between buyers and sellers, while preserving the buyer's ultimate authority over critical regulatory actions. Variations in control, timing and the allocation of responsibilities reflect tailored approaches to managing regulatory risk, balancing the need for coordinated engagement with regulators with the buyer's interest in maintaining ultimate control over the regulatory approval process.

IV. Filing deadlines

While most of the transactions establish specific deadlines for regulatory filings shortly after signing, the exact timing and sequencing of the filings can vary. These transactions reflect the agreement among the parties for prompt filings as well as the need to address the specific circumstances of each transaction. Some agreements provide for coordinated or staged filings to manage the complexities of obtaining approvals from multiple regulatory authorities.

Four of the transactions analyzed provided that HSR premerger notification filings must be made between 20 to 30 days following execution of the principal transaction document, consistent with market practice for timely regulatory engagement. This represents a substantial extension over the historical market standard of ten days due to the implementation of new HSR rules that materially increase both the preparation burden and the time required for HSR submissions. In one transaction, the parties agreed to make the filing within three days after signing. This unusually short filing deadline may be related to the fact that the transaction was signed on the effective date of the new HSR rules.

One of the transactions took an unusual approach to the HSR filing deadline. Specifically, in this transaction the HSR filing must be submitted within 25 business days after a mutually agreed date, which may be set no more than one year before the anticipated closing and no later than six months before the then-applicable outside date. This timing appears designed to align with the one-year validity of HSR clearances issued by the Department of Justice, ensuring that the clearance remains effective through closing without the need for refiling or the risk of expiration. Similarly, while most transactions establish firm timelines for filings with the Federal Energy Regulatory Commission (FERC), typically within 15 to 30 days of signing, this particular transaction deviates from market practice by not specifying a fixed FERC deadline. Instead, it imposes a 90-day restriction on making other regulatory filings, perhaps reflecting additional complexity associated with the fact that the target was a regulated utility.

Other regulatory filings, which are generally not subject to specific contractual deadlines, are typically coordinated with the primary regulatory approval processes to prevent conflicts and delays, ensuring orderly progression through the overall governmental review process.

V. Outside dates

All the analyzed transactions establish a clear "outside date" or "end date," after which either party can terminate the transaction if it has not been consummated by that date. This date ranges from six months to 15 months from the date of the agreement. Each agreement also incorporates extension mechanisms that allow the outside date to be extended if regulatory conditions have not been satisfied or waived.

Despite these commonalities, there are notable differences in the mechanics for extension. For example, in one transaction, the outside date may be extended twice, with each extension lasting 105 days (for a total of 210 days). These extensions are not automatic and may be exercised by either the buyer or the seller if, on the outside date, regulatory closing conditions remain unsatisfied. In contrast, another transaction provides for a single automatic extension to a specified date if the regulatory conditions remain unsatisfied. In yet another transaction, the outside date is automatically extended by approximately four and a half months, with a further three-month extension possible by mutual agreement, provided all non-regulatory conditions have been satisfied. Finally, one transaction allows for multiple 30-day automatic extensions, contingent on the continued satisfaction of certain conditions at the end of each period. In two of the transactions with automatic extensions, the extension occurs only if the buyer is not in material breach of the regulatory efforts covenant in a manner that is the primary cause of the failure to consummate the transaction by the initial outside date.

VI. Key takeaways

Set forth below are the key takeaways from our analysis of these transactions:

• Regulatory risk sharing (as opposed to "hell or high water") is standard: In each of the transactions, the buyer and seller shares (to one degree or another) the risk of not obtaining the required regulatory approvals, by relieving the buyer of the obligation to take actions or agree to remedial measures if doing so would give rise to a burdensome condition (defined in similar but not identical ways), or by excluding certain actions or remedial measures from the buyer's general efforts obligation. None of the transactions imposes a "hell or high water" standard on the buyer.
• A regulatory termination fee is market standard: Each transaction requires the buyer to pay the seller or the target a termination fee (ranging from 1.7 percent to 6.7 percent of the target's enterprise value) in the event required regulatory approvals are not obtained. In circumstances in which the fee is payable, it is the sole and exclusive remedy of the seller or target.
• The buyer ultimately controls the regulatory approval process: While each of the transactions provide for some degree of cooperation, joint conduct and consultation between the buyer and the seller regarding the regulatory approval process, ultimately the buyer can control the process.
• The approach to regulatory filing deadlines is relatively standard, with one outlier: The approach in the transactions to regulatory filing deadlines generally provides for deadlines of 20 to 30 days for HSR filings, 15 to 30 days for FERC filings and unspecified dates for other regulatory filings. However, one transaction took an unusual approach, which appears to be intended to preserve the effectiveness of the HSR clearance (which expires after one year), which presumably reflects the parties' agreement in that the transaction will require an extended regulatory review process.
• Outside or end dates all provide for regulatory-related extensions: The transactions provide for an outside or end-date ranging from six to 15 months. Each transaction provides for an extension of this date if specified regulatory approvals are not obtained by that date, although the mechanic for such extension varies considerably from transaction to transaction. In some transactions, the extension is automatic if the regulatory-related conditions are not satisfied as of the initial outside date, while in other deals, either party may extend the outside date assuming it is not in material breach of the agreement.

_{1 White & Case served as counsel to either the buyer or the seller in two of these six transactions. Some of the transactions have not yet closed. Accordingly, due to client sensitivities, we have declined to identify these transactions by name.}

Comparative snapshot

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A fresh look at Foreign Private Issuers

SEC proposal may have implications for M&A transactions

Michelle B. Rutta

In June 2025, the US Securities and Exchange Commission (the SEC) issued a concept release seeking comment on whether to revise the requirements to qualify as a "foreign private issuer" (FPI). An FRI is an issuer organized outside of the United States that meets specified conditions and, when accessing the US capital markets, is afforded a number of important accommodations compared to US domestic issuers. A substantive revision of the definition of FRI would likely have repercussions for M&A transactions, including the potential loss of access to certain exemptions from US securities laws for cross-border transactions, more burdensome due diligence and regulatory uncertainty.

Currently, an issuer qualifies as an FRI if:

• 50 percent or less of its outstanding voting securities are held of record, directly or indirectly, by US residents or
• If more than 50 percent of its outstanding voting securities are held by US residents, it has none of the following US contacts: (i) a majority of its executive officers and directors are US citizens or residents; (ii) more than 50 percent of its assets are located in the US; or (iii) its business is administered principally in the US

The SEC's June release sought input on the following possible approaches to amending the FRI definition:

• Updating the existing FRI eligibility criteria
• Adding a non-US trading volume requirement
• Adding a major non-US exchange listing requirement
• Incorporating an SEC assessment of non-US regulations applying to the FRI
• Establishing new mutual recognition systems, similar to the existing Multijurisdictional Disclosure System with Canada
• Adding an international cooperation arrangement requirement that the FRI be incorporated or headquartered in a jurisdiction that is a signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation, Cooperation and the Exchange of Information (MMoU) or the Enhanced MMoU

The SEC indicated that its consideration of potential revision to the definition of FRI is the result of the significant changes in the FRI population over the past 20 years in terms of their jurisdictions of incorporation and headquarters, and their primary trading market. In 2003, Canada and the UK were the most prevalent jurisdictions for both incorporation and headquarters, and more than 90 percent of FRIs were incorporated and headquartered in the same country. In contrast, 20 years later, close to half of FRIs had differing jurisdictions for incorporation and headquarters, with the Cayman Islands being the most common location for incorporation and mainland China being the most common location for headquarters. In addition, global trading of FRI equity securities has become increasingly concentrated in the US. A majority of FRIs now maintain listings of their equity securities only on US national exchanges. Since the existing FRI regulations were based on the premise that most FRIs would be subject to meaningful home-country regulation and would trade in foreign markets, the SEC believes that it may be appropriate to revisit FRI regulation in light of the significant changes in the global capital markets and the characteristics of FRIs.

A number of the comment letters submitted to the SEC in response to the June release express concern that if the SEC narrows the definition of FPI, many foreign companies will leave the US capital markets, and US investors will lose access to these issuers. Commenters have also noted that the SEC's release does not include evidence of large-scale market failures resulting from the current FPI regime. In addition, commenters have stated that FPIs often voluntarily comply with many of the requirements applicable to US domestic companies, such as issuing quarterly earnings and releasing material information more quickly than required by Form 6-K.

The potential impacts on M&A transactions of a substantive revision to the FPI qualification rules include the following:

Foreign acquirees could lose the ability to present financial statements in IFRS only

A change in FPI qualifications will likely impact the applicable accounting standard for foreign acquirees. Currently, the SEC's accounting rules permit acquired businesses that would meet the definition of FPI if they were registrants to present financial statements in International Financial Reporting Standards, or IFRS, without a reconciliation to US GAAP. Foreign target companies that would no longer meet a narrowed definition of FPI and who do not qualify as "foreign businesses" (an SEC accounting definition that is narrower than the current FPI definition) will be required to present financial statements in US GAAP. Such a requirement would pose substantial costs and delays on the acquisition, and could create a disincentive for US public companies pursuing acquisitions of such foreign companies.

Exemptions for cross-border tender offers could be impacted

The US tender offer rules currently provide two levels of exemption for cross-border transactions, in order to facilitate US shareholder participation in tender and exchange offers involving non-US targets. To qualify for the "Tier I" exemption, US shareholders must hold 10 percent or less of the securities sought in the tender offer. The Tier I exemption exempts a bidder from most of the regulations applicable to US tender offers. To qualify for the "Tier II" exemption, US shareholders must hold 40 percent or less of the class of securities sought in the tender offer. The Tier II exemption provides an exemption from a number of US tender offer regulations that often conflict with foreign regulatory requirements, including certain aspects of the all-holders rule, prompt payment requirements and the rule prohibiting bidder purchases outside the tender offer.

To qualify for a Tier I or Tier II exemption, the target company must be an FPI. If the definition of FPI is narrowed, bidders for target companies that no longer qualify as FPIs will be subject to the full US tender offer regulatory regime, including disclosure, payment and extension requirements, and outside purchase prohibitions, that frequently are in conflict with practices in other jurisdictions. Cross-border tender offers into the US could become burdensome and impractical for non-US issuers, and could result in US shareholders being excluded from participation in such business combinations.

Cross-border rights offerings

Under existing Rule 801, a rights offering made by an FPI to its US shareholders is exempt from registration under the Securities Act if US shareholders own 10 percent or less of the subject class, assuming certain other requirements are met. Similar to the cross-border tender offer exemptions, Rule 801 was promulgated to promote participation by US holders in foreign company rights offerings. Any reduction in the number of companies that qualify as FPIs would result in more non-qualifying foreign companies that will be more likely to exclude their US shareholders from rights offerings.

Regulation S financings

Regulation S permits FPIs with no "substantial US market interest" (determined based on the level of trading in the US) to use a Category 1 exemption from registration in the US. This exemption permits such FPIs to conduct securities offerings outside the US in "offshore transactions" if no "directed selling efforts" are made in the US. Qualifying for the Category 1 exemption is advantageous for foreign issuers because, unlike the other Regulation S exemptions, Category 1 transactions are viewed as the least likely to result in securities flowing into the US, and so are not required to abide by a "distribution compliance period," i.e., a period following the offering during which the securities may not be offered or sold by the purchasers to a US person.

Regulation S facilitates offshore offers and sales by foreign issuers. Non-US issuers who would no longer qualify as FPIs under an amended framework will face the risk of triggering US registration requirements unless they comply with the more onerous requirements of Regulation S. This could make financings by acquirers through international capital markets more burdensome and difficult.

Impact on M&A deal process, timing and cost

A significant change in the definition of FPI would likely impact M&A transactions in several other ways:

• Due diligence impact: Foreign target companies that no longer qualify as FPIs and leave the US reporting system may not have readily available US-level disclosure and financial information. Due diligence will likely take longer and cost more, as there may not be US-style disclosure documents on which to base representations and warranties, covenants and conditions.
• Regulatory uncertainty for acquirers and targets: During the pendency of a potential FPI rulemaking process, there will be significant uncertainty as to which foreign companies will continue to qualify for FPI status, and both acquirers and targets will need to consider the possible additional regulatory burdens and costs if a registrant's FPI status is lost, including the need for executive compensation disclosure, proxy statement requirements, quarterly filing obligations, beneficial ownership reporting and the potential need for adoption of US GAAP.

As of this writing, the SEC has not responded to the numerous comments it received to its concept release or indicated its intentions with respect to possible revision of the FPI regulations. Given the breadth of potential implications for business combination transactions, public companies considering M&A activity should keep abreast of any future developments.

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Delaware M&A developments

Dan Kessler

In the second half of 2025, Delaware courts issued several decisions affecting M&A dealmaking.

Sjunde AP-Fonden v. Activision Blizzard:

"Recalibrated" aiding and abetting analysis sees claims

dismissed against third-party acquiror

The Delaware Court of Chancery dismissed claims that Microsoft Corporation aided and abetted alleged breaches of fiduciary duties by directors of Activision Blizzard, Inc. in connection with Microsoft's acquisition of Activision. While the Court of Chancery was unwilling, at the pleading stage, to dismiss the plaintiff's fiduciary duty claims against Activision's directors, it found that recent Delaware Supreme Court decisions had "recalibrated the elements of a claim for aiding and abetting." According to the Court of Chancery, those decisions "emphasize that a claim for aiding and abetting is particularly difficult to assert against a third-party acquiror... which enjoys some level of protection in negotiations with a potential target."

To state a claim for aiding and abetting, a plaintiff must allege that a third party knowingly participated in a breach of fiduciary duty. With respect to knowledge, the Court of Chancery, citing the Delaware Supreme Court, found that the defendant must (i) know that the primary party's conduct was a breach and (ii) have actual knowledge that their conduct was legally improper. According to the Court of Chancery, "knowledge of a primary party's misconduct is not enough." With respect to participation, the aider and abettor must provide "substantial assistance" to the primary violator.

The Court of Chancery found that the plaintiff failed to allege that Microsoft knew of the underlying fiduciary duty breach or that its bid under the circumstances was wrongful. In addition, there were no allegations that Microsoft substantially assisted in the underlying fiduciary duty breach. As a result, the aiding and abetting claims against Microsoft were dismissed. The Court of Chancery's high bar for such claims to proceed confirms that under Delaware's recalibrated approach, aiding and abetting will be difficult to plead.

Jacobs v. Akademos: Don't forget fair dealing when determining "Entire Fairness"

The Delaware Supreme Court affirmed an October 2024 Court of Chancery ruling that Kohlberg Ventures' 2020 acquisition of Akademos, Inc. was entirely fair. Importantly, the Supreme Court addressed plaintiffs' argument that the Court of Chancery failed to consider fair dealing in its entire fairness analysis. While noting that "sometimes, a fair price is the most important showing," the Supreme Court disagreed with the Court of Chancery's statement that "the fair price evidence is sufficiently strong to carry the day without any inquiry into fair dealing." The Supreme Court confirmed that "entire fairness is a unitary test, and both fair dealing and fair price must be scrutinized by the Court of Chancery." However, the Supreme Court found that the Court of Chancery made "extensive factual and credibility determinations that supported fair dealing," and therefore affirmed the finding of entire fairness. The Akademos decision stands as a reminder that, in transactions that are subject to entire fairness, attention must be duly paid to process as well as price.

Miller v. Mellor: Untimely closing statement does not waive post-closing purchase price adjustment procedures

The Delaware Court of Chancery upheld a post-closing purchase price adjustment in favor of a buyer despite the fact that the required closing statement was submitted after the required deadline. The purchase agreement with respect to the acquisition of Miller-Remnick LLC required the buyer to submit a closing statement within 90 days after closing. The closing statement included calculations of cash, working capital, indebtedness and transaction expenses for purposes of a post-closing purchase price adjustment. A closing statement was delivered to the sellers, but after the 90-day deadline. Thereafter, communications occurred in which the sellers requested supporting documentation to the closing statement. The parties were unable to resolve their disputes over the closing statement. Sellers delivered an objection statement, but similarly missed their 30-day deadline in the purchase agreement.

Pursuant to the purchase agreement, an accounting firm would determine the final closing consideration if the parties could not agree. Ultimately, the accounting firm found in favor of the buyers and ordered the sellers to pay approximately US$1.7 million. Sellers asked the Court of Chancery to invalidate the award, citing two Delaware cases. While the Court of Chancery acknowledged that such cases "stand for the general assertion that failure to timely deliver a closing statement can waive post-closing adjustment procedure," it found factual distinctions. Importantly, the Court of Chancery noted that in the cited cases, the failure to timely deliver the closing statement would hinder the seller's ability to respond or would prevent the final adjustment from being determined in a timely fashion. In the current dispute, the Court of Chancery found that sellers "took an abundance of time, more than the originally allotted 30 days, to submit their objections to the closing statements and proceeded to engage willingly" in the post-closing adjustment procedure. The sellers "had sufficient time to defend their rights... and availed themselves of that right by submitting their Objection Statement and engaging in the process to obtain an arbitrator to resolve the objections." As a result, the Court of Chancery upheld the accounting firm's award to the purchaser. Going forward, parties to post-closing purchase price disputes should recognize that engaging in the process may prohibit them from later raising missed deadlines as an objection.

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States increase involvement in merger reviews while administration makes good on promise to bring back remedies

Heather Greenfield and Jim Canfield

In the first ten months of the second Trump administration, there have been two notable shifts in antitrust pertaining to mergers and acquisitions. First, state regulators are expanding their premerger notification requirements, continuing a trend of increased activity for state antitrust regulators. Second, the Trump administration has implemented its promised return to merger remedies, moving away from litigation to block mergers and toward approving mergers subject to divestitures or behavioral remedies.

1. Washington and Colorado become first states to enact "Uniform Antitrust Pre-Merger Notification Act"

Parties negotiating deals will need to factor broader state-specific pre-merger requirements into their deal analysis and timelines. Colorado and Washington¹ became the first two states to implement the Uniform Law Commission's "Uniform Antitrust Pre-Merger Notification Act," vastly expanding on their own and other states' industry-specific requirements. Colorado's regime went into effect on August 6, 2025, and Washington's went into effect on July 27, 2025. The Colorado and Washington requirements are similar. While several states already have a healthcare-focused merger review law in place, the new Washington and Colorado state laws are the first comprehensive state merger notification laws of their kind. Both apply to HSR-reportable transactions that also meet certain state-level requirements, including if the filing party:

• Has a principal place of business in the state or
• Had annual net sales in the state of goods or services involved in the proposed merger transaction of at least 20 percent of the HSR filing threshold or
• Is a provider or provider organization conducting business in the state

Out-of-state parties will need to determine whether they have sufficient sales in the state to make a filing and the analysis can be nuanced.

Parties required to submit a state pre-merger filing must submit a copy of the HSR form simultaneously with the HSR filing.

2. What are the differences with the Federal HSR Act?

The new Washington state law differs from the HSR Act in several key ways:

• HSR filing attachments (e.g., transaction-related documents) are not required to be provided in the first instance, unless a filing party has its principal place of business in the state. This means that filers who trigger a filing only through sales to the state of Colorado/Washington or by their status as a covered provider organization initially only need to provide the HSR form itself. However, for these filers, HSR attachments must be provided within seven days of a request by the attorney general.
• Unlike HSR filings, there is no filing fee. The attorney general is not allowed to charge a filing fee.
• Parties are not subject to a statutory waiting period (like the 30- or 15-day waiting period under the HSR Act). That said, notification must be provided contemporaneously to the Washington Attorney General, as with the federal antitrust agencies.
• There are also currently no exemptions under the new state law.

There are, however, some components of the new Colorado and Washington state laws that resemble the existing HSR Act:

• The Washington and Colorado Attorney General must keep information confidential from the public, though the attorney general may share materials with the Federal Trade Commission, the Antitrust Division of the Department of Justice, or the attorney general of another state that has also enacted the Uniform Antitrust Pre-Merger Notification Act or a substantively equivalent act.
• Parties who are in noncompliance with the new state laws (by failing to file their qualifying HSR with the relevant state) can be held liable for civil penalties of up to US$10,000 per day. The current HSR Act penalties (which cover conduct broader than failure to notify, such as gun jumping) are US$53,088 per day.

3. Key takeaways

These two early adopters signal an expansion of state-level merger review. Traditionally, state premerger notification programs have focused on healthcare. As states expand into broader applicable filing regimes, dealmakers will need to involve antitrust counsel as early as possible in order to identify all necessary jurisdictions and prepare timely filings.

The adoption by states of the uniform premerger notification regime comes at a time when states are taking a more active approach to mergers. For example, attorneys general representing 12 states and the District of Columbia filed a motion to intervene in a case reviewing the DOJ settlement approving the merger of Hewlett Packard Enterprise and Juniper Networks.²

• Analyze state-specific impacts of a deal early. Parties who expect to make an HSR filing should work with antitrust counsel early to check for any qualifying Washington or Colorado nexus to determine whether a state notification is necessary.
• Be aware of the evolving landscape of state-level notification laws. Parties who regularly make HSR filings should stay informed on changes and variance in state-level notification laws. Frequent communication with antitrust counsel can ensure that all required filings are made and accounted for in the transaction agreement.

4. Remedies return

After the Biden administration focused its merger enforcement efforts on litigation to block anticompetitive mergers, the second Trump administration spent the first several months after inauguration day signaling a return to the practice of clearing mergers subject to remedies. More recently, the administration has implemented that vision, approving seven different mergers subject to remedies. In general, structural remedies such as divestitures are the preferred method, but the administration has also shown that it will utilize behavioral remedies that suit its priorities. Divestitures to-date have involved industries ranging from retail gasoline to aerospace to internet hardware. However, two mergers challenged by the second Trump administration both have involved medical device companies.

Trends in HSR data³ suggest that parties view the administration as pro-merger. Monthly HSR filings have more than doubled since March. The FTC announced that a formal remedies policy outlining its approach is forthcoming, but the agency has stated that its goal in crafting a divestiture is to 1) make the divested line of business viable; 2) give the divestiture buyer the incentive and ability to compete against the merged entity; and 3) eliminate entanglements between the divested assets and merged entity.

When working with federal regulators, the renewed emphasis on negotiated settlements means the agencies will be more involved in crafting remedies, giving merging parties less control over the nature of the remedy but more confidence that the deal will eventually go through.

_{1 S.B. 5122, 69 Leg., 2025 Sess. (Wash. 2025), available at link; Colorado Senate Bill 25-126: Article 4.5 - Uniform Antitrust Pre-Merger Notification Act, available at link.
2 States Want to Keep Eye On US$14B HPE-Juniper Deal Review – Law360 
3 The latest HSR data show competing influences of New HSR Rules and new administration on merger filings, but yearly HSR filings are steady YTD 2025 | White & Case LLP}

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_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2025 White & Case LLP}