Mergers and Acquisitions Research Paper Example | Topics and Well Written Essays - 2000 words

Mergers and Acquisitions - Research Paper ExampleOver the ensuing months, Omnicare proposed a number of transactions involving the sale of NCSs assets under bankruptcy that would non include paying mangle a majority of NCSs debt. Moreover, Omnicares proposal did not include relief for NCSs stockholders. propagation was approached by the committee formed by the subordinated note holders in early 2002 and Genesis supported a band aside from the bankruptcy that included a discharge of NCSs senior debts and a payment to NCSs stockholders of approximately US$24 million. Genesiss prolong had a number of exclusive arrangements and any indications were that any deal would have to be locked up so that a higher bid would not prevail (Omnicare, Inc. v. NCS Healthcare, Inc.818 A.2d 914 (Del. 2003)). When Omnicare became aware of Genesiss offer, Omnicare amendd its offer and withdrew the initial requirement for bankruptcy and likewise offered to discharge NCSs debts and shareholder payme nts. NCS responded by using Omnicares offer to get Genesis to improve its offer. This tactic worked as Genesis improved its offer, entirely demanded that the offer be approved within 24 hours otherwise it would be withdrawn. NCSs maturate of directors recommended accepting Genesiss offer and just onwards a shareholders meeting to accept the offer by Genesis, Omnicare improved its bid so that its offer exceeded the offer made by Genesis. The fusion arrangement however did not make provision for an out, the NCS/Genesis fusion was locked in. As a result, Omnicare the minority shareholders of NCS took the matter to court with a view to enjoining the NCS/Genesis merger. healthy Issues The primary reasoned issue was the validity and enforceability of a lock-in or no give away clause in a merger and acquisition agreement. The question for the court was whether or not a no shop agreement could be enforced so that NCS could not consider the offers and bids for merger by Omnicare. It has been previously held in some jurisdictions in the US that a no shop clause was valid when it allowed a poster to legally bind the organization to a merger arrangement so that it may not conduct or accept an offer from another organization until such time as the shareholders considered the original offer (Jewel Cos., Inc. v. Pay Less Drug Stores Northwest, Inc. 741 F.2d 1555 (9th Cir. 1994)). The Delaware Supreme court however, considered the no shop clause in spark of the fiduciary duty of the board of directors to obtain the best deal possible and to re-evaluate its decisions. In this regard, the main legal issue for the Delaware Supreme court was not so much a no shop clause, but the significance of a fiduciary out clause in negotiating mergers and acquisitions. Court Holding Consequence restoration Who Won and Who Lost The Chancery Court of Delaware declined the application by NCSs minority shareholders and Omnicare to enjoin the merger by NCS and Genesis. The Chancery Co urt held that the business judgment rule functioned to prevent indiscriminate challenging of board of directors decisions. There is a general presumption that directors act in good faith and are level-headed when making a decision and do so in the best interest of the company. Any fellowship who alleges otherwise must prove that the presumption cannot be made. The Chancery Court of Delaware also ruled that the no shop clause was consistent with the law of Delaware although it could be scrutinized by the judiciary. Such scrutiny will normally only occur when the board has taken defensive action in