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First Principles for Addressing the Competing Interests of Common and Preferred Stockholders in an M&A Transaction

October 1, 2010, Mark Morton, Pamela L. Millard

When engaged by a Delaware corporation with a common and preferred stock capital structure to provide advice in an M&A transaction, counsel should expect to face a complicated array of legal issues posed by the potentially competing nature of the interests of the common and preferred stockholders. Among other issues, counsel will be expected to advise the board on (i) how to account for the frequently competing, occasionally antagonistic, interests of common and preferred stockholders, (ii) how to overcome, or insulate the board from, potential conflicts within the boardroom, and (iii) the process to be used for determining the allocation of merger consideration among the common and preferred. In connection with such an M&A transaction, board counsel will be expected to provide clear and reliable guidance on these issues.

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