The recent Delaware Chancery Court decision in Alliance Data Systems Corp. v. Blackstone Capital Partners V, L.P. and Aladdin Solutions, Inc. provides a strong pronouncement on the effectiveness of private equity deal structures. The deal structure at issue involved the formation of a separate "shell" acquisition subsidiary and the private equity sponsor of the buyer agreeing to provide a reverse termination fee payable to the target. This type of structure is intended to ensure that the private equity sponsor is not itself held contractually liable for obligations (including those of the acquisition subsidiary) under the merger agreement, other than for the obligation to guarantee payment of the reverse termination fee.

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