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On May 11, 2012, Delaware Chancellor Leo Strine addressed an
invitation-only breakfast gathering at The University Club of New
York on a wide range of topics, including investment banking
conflicts. Among Chancellor Strine's noteworthy observations
were:
The stock ownership disclosure obligation of bankers and other
advisors he recently referred to in his opinion in In Re El
Paso Corporation Shareholder Litigation certainly applies to
advisors "in the room" (i.e. the individuals actually
advising the board and management and/or negotiating the deal
terms) but not "some trader in London" only tangentially
involved in the deal process;
Banks with the least number of potential conflicts (i.e.,
boutique banks) are not necessarily the best advisors for a target
company – very often "access to the leverage markets
on a daily basis is a very important expertise;"
Second fairness opinions provided to supplement a fairness
opinion provided by a conflicted or potentially conflicted bank
that ran the sale process typically are not given much weight by
the Delaware Chancery Court.
Chancellor Strine's humorous, sharp, and articulate style
were well exhibited during the morning's hour-plus long
question-and-answer format. (On the expense of litigating in the
Chancery Court: "We are Bergdorf's, not a Dollar
Store;" on how a banker-witness should not present himself on
the stand to a judge: "I have a second trophy wife and you
drive a used car;" on what clients should expect from their
highly-paid lawyers: "Interpreting our opinions is not like
punching in orders at a McDonald's drive-thru: you need to
actually think about what is situationally appropriate".)
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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