The recent Delaware ruling in In Ancestry.com Inc. Shareholder Litigation provides a cautionary tale relating to a target company developing aggressive projections during an auction process.
The Relevant Facts
Following the announcement of a going-private transaction, some shareholders of Ancestry.com filed suit in the Delaware Court of Chancery alleging, among other things, that the board preferred the interests of the winning bidder over shareholders. Previously:
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- Ancestry hired Qatalyst Partners LLP as its financial advisor and initiated an auction process.
- Ancestry’s management prepared “bullish” projections for the auction process. Notably, Ancestry does not develop long-term projections in the usual course of
The Canadian government’s Bill C-60 contains proposed amendments to the Investment Canada Act that will significantly impact foreign investors whom the Canadian government considers as state-owned enterprises (SOEs). An investor might be an SOE even if a foreign state only indirectly “influences” the investor. Under these amendments, if the Minister of Industry determines that an investor is an SOE and it is acquiring control of a Canadian business, then the applicable review threshold will be the lower SOE-specific threshold and not the significantly higher threshold for non-SOE investments. A finding by the Minister that an investor is an SOE may … Continue Reading
The Quebec Court of Appeal’s decision in Francoeur v. 4417186 Canada Inc., 2013 QCCA 191, provides a cautionary tale on the dangers of entering into a share purchase agreement and subsequently closing a share purchase transaction, without ample due diligence.
The one-sided apportionment of risk
The Francoeur share purchase agreement (the “SPA”), which was signed by parties the court characterized as “fierce competitors”, contained the following key provisions.
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- The purchaser acknowledged that (a) until closing, it did not have access to certain “key documents” held under seal, (b) it had not undertaken any due diligence, and (c)