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How Does One Lock-Up a Friendly Deal After Omnicare v. NCS?

Helsinki Law Review 1/2015 s. 74–97
25.6.2015
Opiskelijakirjoitus

Deal protection devices are contractual terms in a merger agreement. They motivate parties to consummate the underlying transaction. The Delaware Supreme Court held in its 2003 decision, Omnicare Inc. v. NCS Healthcare Inc. (“Omnicare”), by a 3 to 2 vote, that the NCS board had breached its fiduciary duties by accepting deal protection devices that created “an absolute lock-up”.2 The Omnicare decision created a new legal rule: the target board has to retain an effective fiduciary out provision that allows the board to terminate the deal if it receives a superior proposal from another company. However, due to other courts’ narrow construction of Omnicare and practitioners’ creative crafting of new deal protection devices, there is a good reason to believe that Omnicare has limited applicability today.

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