Delaware Court of Chancery Issues Ruling in de-SPAC Lawsuit

On January 3, 2022, the Delaware Court of Chancery (the “Court”) issued its ruling in In Re: MultiPlan Corp., its first in connection with a de-SPAC transaction. While the significant increase in the use of special purpose acquisition companies (“SPACs”) has resulted in intense scrutiny from the US Securities and Exchange Commission and several shareholder lawsuits, the Court’s ruling is significant because it addresses fiduciary duty issues resulting from a financial/governance structure common to SPACs.

In addition to addressing disclosure requirements, the Court addressed the allegation that the SPAC’s structure created inherent conflicts for the SPAC’s sponsors and directors, ruling that the onerous entire fairness standard applied because of those conflicts, rather than the business judgment rule.

Although much of the Court’s ruling was specific to the facts of the MultiPlan litigation, particularly the allegations of material disclosure violations, it is likely to result in additional litigation in de-SPAC transactions and provides a roadmap for plaintiffs moving forward.

In light of this, SPACs should consider adopting deal processes long utilized in traditional mergers, including:

  • Appointing an independent special committee to evaluate the proposed transaction;
  • Utilizing qualified financial and legal advisors; and
  • Obtaining a third-party fairness opinion.

As a leading valuation advisor to SPACs, Centri is uniquely qualified to provide independent fairness opinions to boards and special committees as they look to fulfill their fiduciary duties.

About Centri Business Consulting, LLC

Centri Business Consulting provides the highest quality advisory consulting services to its clients by being reliable and responsive to their needs. Centri provides companies with the expertise they need to meet their reporting demands. Centri specializes in financial reportinginternal controlstechnical accounting researchvaluationmergers & acquisitions, and tax, CFO and HR advisory services for companies of various sizes and industries. From complex technical accounting transactions to monthly financial reporting, our professionals can offer any organization the specialized expertise and multilayered skillsets to ensure the project is completed timely and accurately.

Philadelphia
Eight Penn Center
1628 JFK Boulevard
Suite 500
Philadelphia, PA 19103
New York City
530 Seventh Avenue
Suite 2201
New York, NY 10018
Raleigh
4509 Creedmoor Rd
Suite 206
Raleigh, NC 27612
Tampa
615 Channelside Drive
Suite 207
Tampa, FL 33602
Atlanta
1175 Peachtree Street NE
Suite 1000
Atlanta, GA 30361
Boston
50 Milk Street
18th Floor
Boston, MA 02109
Tysons Corner
1775 Tysons Blvd
Suite 4131
McLean, VA 22102
Denver
One Tabor Center
1200 17th St.
Floor 26
Denver, CO 80202
Centri Everywhere
1-855-CENTRI1
virtual@CentriConsulting.com

06/11/2024

3 Key Details for a Successful CECL Implementation

Current Expected Credit Losses (CECL) is a financial accounting standard introduced by...

Read More

05/29/2024

Bridging the GAAP: May 2024

Centri’s Bridging the GAAP newsletter highlights this month’s news, developments and emerging issues in...

Read More

05/22/2024

Mike Andrusko & Maxwell Heller Featured in ACG’s Middle Market Growth Article: Pent-up Energy Could Drive Fintech M&A Wave

Centri’s Mike Andrusko, Partner & Digital Assets Practice Leader, and Maxwell Heller,...

Read More