Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 2017 Del. LEXIS 518 (Dec. 14, 2017)
Twice, in 2017, the Delaware Supreme Court struck down statutory appraisal rulings by the Delaware Court of Chancery that dismissed the importance of the market price.
In DFC Global, Chief Justice Strine expressed strong criticism about the way the Court of Chancery had developed its discounted cash flow analysis as well as the lower court’s decision to calculate fair value by giving equal weight to the result of its DCF analysis, its multiples-based comparable company analysis, and the transaction price.
Recently, in the Dell case, the High Court affirmed its preference for the market price. In 2016, the Court of Chancery had created waves when it found the result of its own DCF analysis was the most reliable indicator of fair value and disregarded altogether the deal price due to what the court considered to be a flawed (albeit conscientious) sales process.
The High Court’s message came through loud and clear: When a merger is the result of a robust market check, the Court of Chancery would do well to resist the urge to ignore the collective judgment of market participants and should not try to develop a DCF analysis that seeks to reconcile two frequently widely divergent expert valuations.
Find out more about the Supreme Court’s analysis in Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. here.
An extended discussion and the Court of Chancery’s opinion for DCF Global are available here (BVLaw Subscribers only).