Special Committees in Mergers and Acquisitions

Summary

This practice note discusses the role that special committees can play in acquisition transactions. Mergers and acquisitions in which corporate fiduciaries are on both sides of a transaction or may derive a personal benefit contain inherent conflicts of interest. Where there are conflicts of interest, legal risks arise that can delay or prevent the completion of a transaction, lead to protracted and costly litigation, and expose fiduciaries to personal liability for breaches of their duties to the company and its stockholders. The use of a special committee of the board of directors composed of independent and disinterested directors has evolved as a mechanism to mitigate the risks associated with conflicts of interest in these types of transactions.