Appraisal Arbitrage Dimmed By Delaware Rulings

By Chelsea Naso (February 15, 2019, 4:07 PM EST) -- Appraisal arbitrage is falling out of style as the reality of recent Delaware rulings sets in, with a new study showing the number of mergers facing shareholder challenges over deal price dropped meaningfully for the second year in a row.

A study from Cornerstone Research released Wednesday evaluates how appraisal litigation has evolved since a 2007 opinion in In re: Appraisal of Transkaryotic Therapies Inc. laid the groundwork for an investment strategy known as appraisal arbitrage. The strategy sees shareholders — largely hedge funds and private equity firms — buy into target companies with the goal of gaining a higher deal price...

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