Appraisal after Dell

Guhan   Subramanian

Chapter | The Corporate Contract in Changing Times | 2019

Appraisal after Dell

Abstract

This essay presents new data on appraisal litigation and appraisal outs. I find that appraisal claims have not meaningfully declined in 2016 and that perceived appraisal risk, as measured by the incidence of appraisal outs, has increased since the Dell appraisal in May 2016. After reviewing current Delaware appraisal doctrine, this essay proposes a synthesizing principle: if the deal process involves an adequate market canvass, meaningful price discovery, and an arms-length negotiation, then there should be a strong presumption that the deal price represents fair value in an appraisal proceeding; but if the deal process does not have these features, deal price should receive no weight. This approach would represent a middle ground between the competing approaches advanced by 29 law, economics, and finance professors in the DFC Global appraisal, currently on appeal to the Delaware Supreme Court.

Keywords: Valuation; Contracts; Negotiation Process;

Format: Print

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Citation:

Subramanian, Guhan. "Appraisal after Dell." Chap. 10 in The Corporate Contract in Changing Times: Is the Law Keeping Up? edited by Steven Davidoff Solomon and Randall Stuart Thomas, 222–243. University of Chicago Press, 2019.

In January 2018, Xerox, a well-known American digital document firm, convened its board of directors to decide whether to approve a merger with Japanese imaging company Fujifilm. Activist Xerox shareholders were suing to halt the transaction, and documents unearthed during the subsequent discovery process revealed that the deal was negotiated by a conflicted CEO. This case study draws from contemporaneous deal documents and unsealed court records to provide a behind-the-scenes look at the deal dynamics. The case raises important issues of deal process design, negotiations, corporate law, and corporate governance.

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Appraisal after Dell

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