Gregory V. Varallo and Srinivas M. Raju
Determining the appropriate standard of review to apply to the utilization of deal protection devises has long been a subject of debate among academics, practitioners, and jurists. This is so because deal protection devices continually evolve. Consequently, it is nearly impossible to develop a “one size fits all” standard of review. This article analyzes the existing standards of review and demonstrates that no single approach is capable of serving as an ideal standard for the various different circumstances under which deal protection measures arise.
By revealing the shortcomings of each approach, this analysis reveals the desirable characteristics that a beneficial and effective standard of review must possess. This article proposes a model standard of review consisting of a series of inquires for the court to perform that encompasses all of these characteristics. This standard of review promises to retain all the benefits of the current approaches while abandoning most of their shortcomings. This model is applied to a hypothetical that exemplifies how it functions in practice. Despite some minor shortcomings, this series of inquiries meets the needs of the court and boards of directors alike, while also protecting the interests of shareholders.