Market Trends 2020: Appraisal Rights Closing Conditions

Summary

This practice note discusses market trends in public target transactions in 2020 with respect to closing conditions that hinge on exercise of appraisal rights by the selling stockholders. The consummation of a merger transaction is generally conditioned on the receipt of stockholder approvals from both parties to the transaction. Related to the issue of stockholder approval is whether the target business's stockholders will be entitled to appraisal rights under state law. To hedge against the risk of appraisal litigation, a buyer may negotiate a condition that would allow it to walk away if a certain percentage of the target business's stockholders exercise their appraisal rights.