Financial Advisor Conflicts Update

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Recently, the Delaware Court of Chancery has examined financial advisor conflicts in the mergers and acquisitions context and emphasized in various opinions that although financial advisors play a valuable role, disclosure of potential conflicts is crucial.  This newsletter examines recent Delaware cases focused on financial advisor conflicts in the areas of stapled financing, contingent fee arrangements, prior work and the financial advisor’s interest in the transaction, and concludes with some recommended best practices.

In recent cases the Delaware Court of Chancery has increasingly scrutinized financial advisor conflicts in the mergers and acquisitions context.  The court has emphasized in various opinions the sentiment that financial advisors play a valuable role, but that disclosure of potential conflicts is crucial and, in the Atheros decision (discussed below), specifically stated financial advisors “serve a critical function by performing a valuation of the enterprise upon which its owners rely in determining whether to support a sale.  Before shareholders can have confidence in a fairness opinion … the conflicts and arguably perverse incentives that may influence the financial advisor in the exercise of its judgment and discretion must be fully and fairly disclosed.”

This newsletter examines recent Delaware cases focusing on financial advisor conflicts in the areas of stapled financing, contingent fee arrangements, prior work and the financial advisor’s interest in the transaction, and concludes with some recommended best practices.

Please see full newsletter below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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