The acquisition of Del Monte Foods Co. by a group of financial buyers was completed earlier this month. [1] The shareholder vote, which took place in early March, had been delayed for twenty days by the Delaware Court of Chancery because the court found that the financial advisor to Del Monte’s board had failed to disclose important information to the board and had become so conflicted in the transaction that the entire process had become tainted by the financial advisor’s misconduct and the directors’ breach of their fiduciary duties. [2]
The Del Monte transaction highlights important considerations for companies pursuing sale transactions, whether in the context of a going-private transaction or a sale to a strategic acquiror. One set of issues centers around the board’s oversight of its financial advisors, and another concerns the appropriate use of special committees by boards. The opinion of Vice Chancellor Laster in the Del Monte case is a powerful reminder to directors that actions such as hiring advisors and forming special committees—while appropriate and even essential in some circumstances—do not obviate the need for members of the board to be fully engaged in and actively supervising the process of negotiating a significant company transaction.