Investment bankers play a central role in the exploration, evaluation, selection and implementation of strategic alternatives for Delaware companies. To enable stockholders to carefully assess how much weight to give an investment banker’s analysis of a proposed strategic transaction, Delaware law requires full disclosure of a banker’s compensation or financial interest, and other potential banker conflicts of interest in connection with the transaction. If the banker’s financial interest in the proposed transaction is “material” and “quantifiable,” full disclosure of the financial interest to stockholders is required under Delaware law. To obtain meaningful relief for the benefit of stockholders, the Delaware Court of Chancery has indicated its strong preference for plaintiffs to assert claims to correct disclosures to stockholders in advance of the stockholder vote on the proposed transaction.
In Vento v. Curry, C.A. No. 2017-0157-AGB (Del. Ch. March 22) (Bouchard, C.), the Court of Chancery held that the fees of buyer’s investment banker for providing debt financing to the buyer for its acquisition of the seller were inadequately disclosed to the buyer’s stockholders. Accordingly, the court issued a preliminary injunction of the vote of the buyer’s stockholders until its banker’s financial interest in the merger is fully disclosed.
