Delaware litigators and deal lawyers around the globe are keen on accounting for the risk of dissenting stockholders exercising appraisal rights when negotiating and structuring a corporate transaction. Recently, however, Delaware corporate law trends may suggest that stockholders are attempting to obtain quasi-appraisal remedies more frequently, often arguing that such a remedy can be a class-wide substitute for foregone appraisal rights. As Delaware courts continue to grapple with the amorphous remedy that is quasi-appraisal and its interplay with directors’ indemnification rights, corporate counsel need to be mindful of the best means to account for this expanding stockholder strategy and attempt to mitigate its risk in the transaction documents.

For appraisals, buyers have long understood that stockholders who perfect appraisal rights under 8 Del. Code Section 262 can obtain “fair value” for their shares as of the merger date instead of the merger consideration. See Verition Partners Master Fund v. Aruba Networks, 2018 WL 922139, at *1 (Del. Ch. Feb. 15, 2018) (objective of appraisal is not to ensure highest possible bid, but to evaluate “whether the dissenters got fair value and were not exploited”). In short, a filed appraisal claim addresses one thing, namely, the value of the dissenting stockholder’s stock. And, it is well established that in determining “fair value,” the Court of Chancery must do so exclusive of any element of value or synergies arising from the merger. The court reviews the entire pre-merger company as a stand-alone entity and assesses its value as such. All relevant factors are considered, and the statute requires consideration of proof of value by any techniques or methods which are generally considered acceptable in the industry. Of course, this means a battle of the experts, Corp & Commercial Practice in DE Court of Chancery 8.10[d][1]. While an efficient market check is generally a reliable assessment of fair value (more so than a paid expert’s opinion), the Delaware Supreme Court recently reiterated that it would not accept the invitation to create a presumption in favor of “fair value” at the deal price, see Dell v. Magnetar Global Event Driven Master Fund, 177 A.3d 1, 21–22, 23 (Del. 2017). That said, the Dell court held that when a robust and efficient sales process is involved (i.e., market efficiency, fair play, low barriers to entry, outreach to all local buyers, and the opportunity for any topping bidder), the deal price deserves heavy weight in the appraisal analysis.