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90 Tul. L. Rev. 545 (2015-2016)

handle is hein.journals/tulr90 and id is 585 raw text is: TULANE LAW REVIEW VOL. 90 FEBRUARY 2016 No. 3 Fleecing the Family Jewels Christina M. Sautter* Crown jewel lock-up options, a common deal protection device employed durng the 1980s'mergers and acquisitions boom, are back Duuing their popularity in the 1980s, these options took the form of agreements between a target company and a buyer, pursuant to which the target granted the buyer the right to purchase certain valuable assets, or crownjewels, of the target corporate family in the event the merger did not close. Alter both state and federal courts questioned the validiy of these lock-ups in the 1980s, lock-ups lost their luster and dealmakers stopped using them. But as the saying goes, everything old becomes new again, and crown jewel lock-ups have made a return in recent transactions. Th7is time around dealmakers have been quick to distinguish the modernized crown jewel lock-ups from their predecessors. Although ther has been linited case law addressing the validity of these lock-ups, courts appear more likely to uphold the lock-up if the lock-up can be attributed to a business purpose other than the merger and if the lock-up could be a stand-alone agreement, separate and apart from the merger Tus Article argues, however, that todays lock-ups am not signricantly different from their predecessors. Practitioners and courts should not lose sight of the 1980s jurisprudence that closely scrutinized the sale process preceding a lock-up as well as the deterrent effects of the lock-up on potential bidders. Failing to consider these factors and not giving these factors proper weight potentially results in companies and their sharholders being fleeced of their corporate familyjewels and their value. At the same time, however, dealmakers should not be as quick to shy away from lock-ups as they have been in the past. As the 1980s jurisprudence made clear, lock-ups can be used to enhance shareholder value. In particular, this Article argues that dealmakers may use lock-ups after an extensive sale process to incentivize bidders and extract additonal value for sharholders. * © 2016 Christina M. Sautter. Cynthia Felder Fayard Professor of Law & Byron R. Kantrow Professor of Law, Louisiana State University Paul M. Hebert Law Center. Thank you to Lee Ann Lockridge, Therese Maynard, and Eric Wilder for their comments. Many thanks to participants at the 2013 National Business Law Scholars Conference, at which an early draft of this Article was presented, and to my research assistants, Mallory McKnight and Anne Kathryn Hunter, for their substantial assistance.

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