Delaware Court Finds Reverse Triangular Merger May Violate Contractual Prohibition on Assignments by Operation of Law

more+
less-

The Delaware Chancery Court, in Meso Scale Diagnostics v. Roche Diagnostics (Apr. 8, 2011), held recently that the acquisition of a company in a reverse triangular merger may constitute an assignment of an agreement by that company and, as such, violate a restriction in the agreement prohibiting assignments by operation of law.

The opinion calls into question the traditional assumption that, in most circumstances, the acquisition of a company through a reverse triangular merger, in which the acquiror forms a shell company and merges the shell company into the target company, with the target company surviving as a wholly-owned subsidiary of the acquiror, by itself is unlikely to violate a typical anti-assignment provision. Delaware courts had not directly addressed the question, but many practitioners assumed that for these purposes Delaware courts were likely to treat a reverse triangular merger as similar to a stock purchase, which the courts had held by itself did not generally constitute an assignment, since the identity of the shareholders would change but there would be no change to the entity.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

more+
less-

Morrison & Foerster LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×