Management buyouts demand board vigilance

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Abstract: Courts often are deferential to directors in cases involving mergers and company sales. But, as a decision by the Delaware Chancery Court shows, that deference has a limit. The plaintiffs claimed that the company’s CEO and directors had breached their fiduciary duties and that the board had committed waste. In refuting the defense, the court pointed to three key facts that “make it impossible to dismiss the complaint.” This case underscores the need for boards to take an active role in negotiations — particularly when a controlling shareholder is involved.