Our thinking

Navigating change: US M&A H1 2018

What's inside

Clouds are forming on the horizon, however appetites for big-ticket deals have not yet diminished

US M&A defies market uncertainty

An impressive first half of the year for US dealmaking reflects M&A's enduring value in an uncertain market

After a very strong 2017—when M&A in the US reached its third-highest overall deal value since the financial crisis—deal value grew again in the first half of 2018. Compared to H1 2017, value rose 30.5 percent to US$794.8 billion when compared to the same period in 2017, while deal volumes held steady.

Activity has been brisk despite increasing macro-economic headwinds. The Federal Reserve recently raised interest rates and signaled its intention to do so again twice more before the year is out. Threats of a bourgeoning global trade war are intensifying after the imposition of tariffs by the US and other large economies. And the US stock market has experienced significantly higher volatility this year than it did last.

One could reasonably expect that M&A would cool against this backdrop, but the fact that it has not suggests that deals are going ahead for essential strategic reasons rather than opportunistic ones.

Technology and its disruptive impact across all sectors is one of the main factors that has made M&A a necessity. The impact has been most apparent in sectors such as retail and healthcare, where digital platforms are ideally placed to disrupt established service and distribution channels. No sector has been untouched, however. Unless non-tech companies have the resources in-house to write their own software and algorithms—and most do not—M&A may be the best option to keep pace with dynamic change.

We expect the second half of the year to be busy, but no one can afford to ignore the threats posed by rising interest rates, increasing protectionism, an incipient trade war that could increase tariffs, a potentially inverting yield curve, unsustainable pricing demands and a volatile stock market. Companies will need to navigate these dynamics if M&A's bull run is to continue.


John Reiss
Global Head of M&A
White & Case

Gregory Pryor
Head of Americas M&A
White & Case


Navigating change: H1 in review

First-half activity remains on par with 2016, as strong fundamentals continue to drive M&A

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PE hits new post-crisis high

Despite intensifying competition within the market, US private equity activity is yet to show signs of a downturn

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Sector watch

Energy, mining & utilities leads the field

Bulky oil & gas deals pushed energy, mining & utilities close to the top spot in H1, while digital disruption ensured a steady flow of tech deals

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Technology M&A gets white hot in 2018

Dealmakers across all industries are looking to secure US tech assets in order to keep up with the technological changes disrupting their industries

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Consumer firms adapt to survive

Despite a drop in headline figures, M&A within the US consumer sector remains an important method to secure long-term growth

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Oil & gas M&A gains cautious ground

A steadying oil price signals a brighter future for oil & gas M&A, yet market caution remains

oil pipelines

Big-ticket deals drive pharma M&A

Activity in the sector is fueled by the need to refill product pipelines and navigate convergence between health and tech firms


Industrials & chemicals M&A gathers pace

Corporate repositioning and tax reform are two key trends driving M&A in the sector


Is blockchain M&A poised to accelerate?

US dealmakers are learning to navigate the complex world of blockchain M&A, but they will have to proceed with care in heavily regulated sectors

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In focus: Financial services regulation

An overview of the financial regulatory landscape and key trends to watch

US dollar

Decision time for M&A in Delaware

Noteworthy rulings out of the Delaware Supreme Court and the Court of Chancery in the past six months are already having consequences for M&A activity

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Spotlight on public companies: Cybersecurity and governance

The number and severity of cybersecurity incidents at major companies has increased, causing regulators to take a tougher approach. We look at five practical steps companies can take to manage these risks

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Key trends to watch in the months ahead

Acquirers shrugged off macro-economic uncertainty in the first half of the year to secure deals of strategic necessity

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Meet our partners

Global M&A leaders

John Reiss


John Reiss
Partner, New York


Gregory Pryor


Gregory Pryor
Partner, New York


 Dr. Jörg Kraffel

Dr. Jörg Kraffel
Partner, Berlin


Christopher Kelly


Christopher Kelly
Partner, Hong Kong


Allan Taylor


Allan Taylor
Partner, London


 Barrye Wall


Barrye Wall
Partner, Singapore


John Cunningham

John Cunningham
Partner, London


Alexandre Ippolito

Alexandre Ippolito
Partner, Paris


Decision time for M&A in Delaware

Noteworthy rulings out of the Delaware Supreme Court and the Court of Chancery in the past six months are already having consequences for M&A activity

5 min read

Dell and DFC Global: Market value may mean fair value

Two high-profile Delaware appraisal rulings from last year are already making waves in 2018.

In December 2017, the state's Supreme Court reversed an earlier ruling by the Delaware Court of Chancery, which found the 2013 buyout of computer maker Dell Inc. to be underpriced. Similarly, in August 2017 the Delaware Supreme Court ruled that the acquisition of payday lender DFC Global Corp. had not been undervalued, reversing another earlier Delaware Court of Chancery appraisal decision.

In both cases, the state's Supreme Court found that deal price should have been given significant weight in the determination of fair value under the appraisal statute.

These rulings were front of mind in this year's appraisal decision regarding Hewlett-Packard Company's 2015 acquisition of Aruba Networks, Inc. The Court of Chancery determined Aruba's fair value to be the 30-day average unaffected market price of US$17.13 per share—a discount from the US$24.87 deal price paid in the transaction.

The Court of Chancery held that the Dell and DFC reversals endorsed using, in addition to share price, the market price of a widely traded firm as an indicator of fair value, if the market for the shares of the firm aligned with the attributes underlying the Efficient Markets Hypothesis (EMH). These include: many stockholders; no controlling stockholder; highly active trading; and information about the company being widely available and easily disseminated to the market.

In addition, the Court of Chancery found that the Dell and DFC decisions endorsed using deal price in a third-party, arm's-length transaction as an indicator of fair value, but only after deducting synergies from the deal price.

Finally, the Court of Chancery found that these reversals urged caution against discounted cash flow analyses prepared by adversarial experts when reliable market indicators are available. Accordingly, the Court of Chancery declined to give any weight to expert valuations of Aruba that relied on discount cash flow analyses.

Finding Aruba's common stock to exhibit attributes consistent with the premises of the EMH, the Court of Chancery considered Aruba's 30-day average unaffected market price of US$17.13 per share to be a reliable indicator of value.

And while the Court of Chancery also considered the US$24.87 deal price to be a reliable indicator of fair value, adjustments would be required to exclude the value of synergies arising from the transaction as required by the appraisal statute.

As a result, the Court of Chancery concluded that the unaffected market price of US$17.13 was the most persuasive evidence of Aruba's fair value. Subject to the Delaware Supreme Court confirming this approach on appeal, dealmakers can expect unaffected market price to be fundamental to appraisal proceedings in the future.


Determining the existence of a "controlling stakeholder" has become increasingly important.

Corwin: Controlling stockholders and adequate disclosure

The Delaware Supreme Court's 2015 decision in Corwin v. KKR Financial Holdings LLC has become a powerful tool for boards of directors defending against breach of fiduciary duty claims with regards to acquisitions.

Under this ruling, director approval of a transaction that is not subject to an entire fairness review is entitled to business judgment deference when the transaction is later approved by an uncoerced, fully informed majority of disinterested stockholders,either by vote or acceptance of a tender offer.

The "cleansing" effect of such stockholder approval is that fiduciary duty claims will be dismissed unless there is a showing of waste.

This defense can be defeated, however, if the transaction involves a conflicted controlling stockholder—subjecting the transaction to an entire fairness review. As a result, determining the existence of a "controlling stockholder" has become increasingly important.


Tesla: Who is a controlling stockholder?

In the case of In re Tesla Motors, Inc. Stockholder Litigation, for example, the Delaware Court of Chancery sided with plaintiffs who argued that, in connection with Tesla's 2016 acquisition of SolarCity Corporation, Elon Musk was a controlling stockholder of Tesla, Inc. even though he held only 22 percent of its common stock.

As a consequence, breach of fiduciary duty claims against the Tesla board of directors and Musk, as a controlling stockholder, survived a motion to dismiss, even though the transaction had been approved by a majority of Tesla stockholders.

The Court of Chancery noted that Tesla's bylaws contained several supermajority voting requirements, allowing Musk significant control while only owning approximately 22 percent of Tesla's common stock.

In addition, the Court of Chancery cited Musk's alleged domination of the Tesla board in the lead-up to the SolarCity acquisition, including bringing the SolarCity proposal to the board three times, leading board discussions and being responsible for engaging the board's advisors.

Finally, the Court of Chancery noted alleged conflicts in the Tesla board that diminished its potential resistance to Musk's influence, as well as Tesla's and Musk's own acknowledgments of Musk's outsized influence.

Parties should be mindful of factors such as these, in addition to stock ownership, in determining whether a "controlling stockholder" exists and whether the "cleansing" effect of a stockholder vote will be available.


Appel: What's does "fully informed" mean?

A second defense to the cleansing effect of Corwin is to establish that stockholder approval was not fully informed. In Appel v. Berkman, in February of this year, the Delaware Supreme Court reversed a Court of Chancery dismissal of a stockholder challenge to the sale of Diamond Resorts International.

The chairman of Diamond's board of directors abstained from voting to approve a sale of the company, but Diamond did not disclose why. The Delaware Supreme Court held this to be material information without which Diamond's stockholders could not have made a fully informed tender into the deal.

Failure to make such material disclosures denied Diamond's board the "cleansing" effect of stockholder approval for the transaction. At the pleading stage, this precluded the invocation of the business judgment rule standard. As a result of this decision, boards must carefully consider how dissenting opinions of directors are discussed in disclosures to stockholders.



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