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DE Court Applies Business Judgment Rule in Reviewing LBO

Robust procedural protections" can achieve business judgment rule review, even where the controlling stockholder retains a material interest in the ongoing company following the buyout.

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M&A transactions involving publicly traded companies with controlling stockholders often present thorny issues for dealmakers and their legal counsel. Even in the case of a purchase by an unaffiliated third party, controlling stockholders understandably may seek to leverage their control positions to achieve results that best suit them. Further, private equity buyers in particular often require controlling stockholders to “roll over” a portion of their stock into equity of the continuing corporation and/or enter into other arrangements to facilitate the transaction.

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