New Delaware Law Allows Mergers to Close Quickly Using a Tender or Exchange Offer - Without a Stockholder Vote

Mark A. Morton and David B. DiDonato

Historically, business planners structured corporate mergers using either a single step (i.e., a vote of the stockholders to approve the merger at a meeting called for that purpose) or two steps (i.e., a public tender by the buyer for the target’s shares, followed by a meeting of the stockholders to approve the merger).  While the single step approach afforded simplicity, it also required time—it is common for a selling company (sometimes called a “target”) to need three to six months (or more) to schedule a stockholders’ meeting, prepare and file a proxy statement, respond to any comments from the Securities and Exchange Commission, mail the proxy statement, solicit proxies and hold the stockholders’ meeting.  In contrast, the two-step approach provided buyers with a straightforward means to acquire majority control (by closing the tender offer in as little as 20 business days), followed later by a stockholders’ meeting at which the vote was a foregone conclusion (since the buyer now owned a majority position).  Moreover, if the buyer acquired enough shares in the tender offer (generally at least 90% of the target’s outstanding shares), Delaware law permitted the buyer to forgo the second step (the stockholder vote) and close the acquisition.

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