Investment bankers seeking to profit as both adviser to the seller and financier to the buyer in corporate sales processes have faced increased scrutiny by the Delaware Court of Chancery over the last few years. In a highly publicized 2011 decision that changed the landscape for investment bankers, Vice Chancellor J. Travis Laster criticized investment banker Barclays PLC for acting both as adviser to the seller and financier to the buyer in the sale process of Del Monte Foods Co. Laster found that Barclays “secretly and selfishly manipulated the sale process to engineer a transaction that would permit Barclays to obtain lucrative buy-side financing fees.” Laster explained that Barclays faced conflicts of interest in the sale process, which were not disclosed to the board of Del Monte Foods, in its role as financial adviser to the board, while at the same time profiting by providing staple financing to the buyer, private equity firm KKR & Co.

In the following year, then-Chancellor Leo E. Strine Jr., now chief justice of the Delaware Supreme Court, issued his decision in a case in which El Paso Corp.’s banker, Goldman Sachs Group, allegedly steered El Paso’s $21.1 billion sale to its buyer, Kinder Morgan Inc. Strine criticized both El Paso’s alleged self-dealing CEO and Goldman Sachs in the negotiations, referring to the sale process as “tainted,” “inadequate” and “disturbing,” but denied a request to preliminarily enjoin the merger to allow shareholders the opportunity to choose for themselves whether to approve the merger because no competing bidders had emerged.

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