JUNE 8, 2016
DELL RULING MAY NOT AFFECT BUYOUTS AS MUCH AS FEARED | Will a judge’s ruling that buyers underpaid for #Dell when it was taken private change buyouts more broadly? Probably not,
Steven Davidoff Solomon argues in the Deal Professor column.
The purpose of appraisal rights is not to say what a company’s market price should have been — it is to give shareholders a remedy if they think the negotiated deal is just not good enough. So the appraisal is based on “fair value,” which can have a different meaning to “market price.” This difference is at the heart of this decision and courts are struggling to figure out what “fair value” is in light of the emergence of hedge funds specializing in exercising appraisal rights.
The proceedings were historically a corporate finance exercise with each party hiring an expert to value the company. In the case of the Dell buyout, Glenn Hubbard, dean of Columbia’s business school and former chairman of the Council of Economic Advisers, calculated the fair value to be $12.68.
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