Delaware Court Finds Reverse Triangular Merger Does Not Violate Contractual Prohibition on Assignment by Operation of Law


The Delaware Chancery Court, in Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH (Feb. 22, 2013), held that the acquisition of a company in a reverse triangular merger did not violate a restriction in an existing agreement of the target company that prohibited assignments by operation of law.

The decision reaffirms the traditional assumption that, in most circumstances, the acquisition of a company through a reverse triangular merger does not violate anti-assignment provisions in the target company’s underlying agreements. In part because of that assumption, reverse triangular mergers are one of the most common M&A structures. In a reverse triangular merger, the acquiror forms a shell company and merges the shell company into the target company, with the shell company disappearing and the target company surviving as a wholly-owned subsidiary of the acquiror.

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