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On December 14, 2017, the Delaware Supreme Court reversed and remanded the Court of Chancery’s appraisal of the fair value of Dell Inc. The trial court’s 2016 ruling, which found that a $25 billion management-led buyout undervalued the computer giant by about $7 billion, sent shock waves across the M&A landscape and emboldened some hedge funds to continue devoting significant time and resources to “appraisal arbitrage.” The Supreme Court’s opinion seems designed to restore a sense of order and calm to appraisal litigation, and to reassure potential M&A targets and buyers that the Delaware courts appreciate and respect market realities and good-faith efforts to run fair sale processes. However, the Supreme Court stopped short of adopting a presumption that deal price equals fair value for purposes of appraisal analysis, or a categorical requirement that deal price must always be an element of the analysis. Arbitrageurs thus may view the Dell ruling as narrowing their window of opportunity, but not closing it entirely.
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