June Edition 2023

59 discounted cash flow that its future investment opportunities would have generated. The appraisal should also consider information available to the offeror regarding the future investment options in the company as they are known to it at the time of purchase, and thus eliminating its informational advantage over the minority shareholders. PROS AND CONS OF EACH STRUCTURE Effecting a going private transaction under the full tender offer alternative does not require board approval of the Target and can be done unilaterally, without negotiating the terms of the deal and without support from the board of the Target. However, the requirement to obtain the affirmative support of at least 95% of the shareholders makes it not feasible in many cases. In some companies, especially those with a longer history, it is a challenge to locate all shareholders and a shareholder who did not respond to the offer would be practically viewed to have objected to the offer. From an economic standpoint, obtaining such a high percentage of support would often require the purchaser to offer a very significant premium. Even if the full tender offer is successful, the purchaser remains at a risk of the court awarding appraisal rights and increasing the consideration. Effecting a going private transaction by way of a reverse triangular merger will provide a higher certainty for consummation of the transaction, since only the approval of shareholders holding a majority of the voting rights is required (if the transaction involves a controlling shareholder, the majority should be of the Disinterested Shareholders). A reverse triangular merger requires engagement and often negotiation with the board of the Target. A going private merger with a controlling shareholder would be viewed by the courts as suspicious, but the formation of a special independent committee and adherence to strict due process at such committee would minimize the risk of the court intervening in the deal.