“Beauty is in the eye of the beholder.”

Delaware courts are altering the way in which they deal with minority shareholder complaints that M&A deal proceeds are inadequate.

Just a couple of years ago, upon announcement of a merger or filing of a proxy statement, minority shareholders often brought suit to enjoin the vote, or the closing, based on inadequacy of price, and failure of full disclosure.

Many cases were settled by companies providing increased disclosure, paying plaintiffs’ attorneys’ fees and receiving blanket indemnity in exchange.

But thereafter, courts began questioning the value of much of the increased disclosure, skepticism tended to take the attorneys’ profit out of such lawsuits, and also tended to reduce “M&A arbitrage,” in which investors purchase target shares in expectation of an increase in deal price.

As courts reduced or denied attorneys’ fees, plaintiffs began turning to the appraisal remedy, and courts then reacted by shrinking the upside in appraisals. Below, a brief history.

To read the full text of this article by Duane Morris partner Stephen M. Honig, please visit the New England In-House website.