Stephen M. Davidoff wrote an interesting article in the New York Times that notes the ten-fold increase in the value of appraisal rights actions over the last 10 years and describes the new trend of hedge funds purchasing shares in target companies following the announcement of an M&A transaction for the sole purpose of exercising appraisal rights with respect to the purchased shares.
The increase in frequency of appraisal rights actions and the presence of aggressive hedge funds as players in the appraisal process should serve as a reminder to both buyers and publicly traded target companies in M&A transactions that your transaction process and price are being watched carefully not only by your own shareholders, but also by other opportunistic investors looking to capitalize on a weak transaction process or price. This reinforces the importance for buyers and target companies to conduct a careful and conflict-free transaction process to deter the initiation of appraisal actions and to defend against any appraisal actions that may be brought by shareholders.
