Glasscock recently distinguished the Netspend decision in Bioclinica, rejecting plaintiff’s claims against the Bioclinica directors alleging breach of the directors’ duties to the stockholders and against the private equity buyer for aiding and abetting the directors. The case involved the sale of a company to a private equity consortium after a lengthy bidding process participated in by both private equity bidders and strategic acquirers. The merger agreement contained several deal-protection devices in favor of the private equity buyer, including a non solicit clause, termination fee, information rights, a top-up option and an exclusive waiver of the poison pill.
Glasscock emphasizes in Bioclinica that the scrutiny placed by the court on the weakness of the fairness opinion in the Netspend case was heightened in the absence of a market check, and that such review is necessarily ”contextual”. He explicitly clarified that his decision in Netspend does not create a new basis to challenge every sales process. The deal-protection devices employed by the Board in Bioclinica were deemed non preclusive, where the sales process was otherwise reasonable.
The recent holding in Bioclinica notwithstanding, given the trend in recent case law, it is advisable for investment banks preparing fairness opinions to take cognizance of whether a company’s board is conducting a thorough market check, or has solicited multiple bidders. A financial advisor should also ascertain the reliability of its basis for valuation and confirm such reliability with management. It is also relevant for an advisor to consider the extent of any deal-protection devices in the merger agreement. The fairness opinion is less likely to be singled out as ‘weak’ if other “contextual” factors in the Board’s process are strong.