In reviewing the matter, Clerk Strine found that Delaware courts are reluctant to establish clear rules that, in any case, invalidate contractual provisions in the event of a merger. “By itself, judgments in which judges invalidate contractual provisions throughout the bar are extremely rare in Delaware, and they should be. This court is a court of fairness, and normally we are dealing with the [question of whether something is right in the circumstances]. And it`s usually up to the legislature to decide when something is illegal per se.  A standstill agreement is a contract that contains provisions governing how a bidder of a company may buy, sell or vote shares of the target company. A standstill agreement can effectively delay or stop the hostile takeover process if the parties cannot negotiate a friendly agreement. The justification for the “Do not ask, do not give up” provisions is the same: as soon as a tenderer has been invited to the tendering process and has had access to confidential information, the Board of Directors of the objective wishes to encourage tenderers to make their best and final proposals in terms of prices and conditions. Consider the following fairly typical hypothesis: however, given the ambiguity created by Genomics, practitioners of the agreement must decide how to proceed in the event of a stop in the auction process. Some seemed to suggest that the “don`t ask, don`t give up” provisions be abandoned in light of genomics.  We believe this goes too far and, as Chancellor Strine explained in Ancestry.com, is not consistent with Delaware principles jurisprudence in the context of the merger. As previously stated, the Management Board should be informed of the recommended conditions of the auction process, including the shutdown, and confirm the approach on the basis of recommendations from external consultants.
Given that Chancellor Strine and Vice-Chancellor Laster have focused on the impact of the provision on possible competing offers after signature, the more cautious approach to the objectives could be to continue to insist on the provision and, if so, to adopt or condition it only at the time of signing a final agreement. In certain circumstances, it may even be appropriate for objectives to condition concretely the provisions of merger agreements which oblige them to enforce confidentiality agreements by reference to an agent, which could be limited to those participants in the process who have not received detailed information or who have not submitted actual proposals. . . .Back to Blog