Special Negotiating Committees: If, When, Who, and How

My colleagues Mark D. Gerstein and Bradley C. Faris of Latham & Watkins have released this Memorandum analyzing whether and when a company should consider empanelling a special negotiating committee when assessing a merger proposal that raises a conflict of interest.  The Memorandum begins by providing critical background for in-house counsel facing the difficult decision whether to convene a special committee to consider the terms of a particular transaction.

The authors then explain why Sarbanes-Oxley, as well as some recent Delaware decisions scrutinizing board processes in connection with going-private deals, should have the general counsel of any corporation thinking seriously about how to manage conflicts of interest in acquisitions–including whether a special committee is needed.  Mark and Bradley conclude:

A board that fails to adequately address conflicts of interest, including in appropriate circumstances by forming a special negotiating committee, risks litigation and personal liability.  An effective special negotiating committee process requires nuanced analysis, strategic planning and careful execution, all things in which, in our experience, general counsels excel.  The general counsel’s participation and support is an essential element to effectively manage the legal and business risks associated with conflict of interest transactions and establish processes that will result in the maximum deference allowed by law from a reviewing court.

The full Memorandum is available here.