Entire Fairness Research Articles

Extending dual-class stock: A proposal

Abstract The increasing use of dual-class voting structures in public companies—and the frequency with which such structures contain sunset provisions—raises the issue of when and how such sunset provisions should be modified, extending the company’s use of the dual-class structure. Recent decisions have applied the entire fairness legal standard to dual-class extensions, but, in the recent Trade Desk case, the Delaware Chancery court concluded that the extension complied with the MFW standard and should therefore receive the protection of the business judgment rule. We question the practicality of applying either entire fairness or MFW to dual-class extensions. Instead, we argue for a contractual approach in which the initial charter specifies the conditions under which a dual-class structure can be extended. The contractual approach increases the information available to shareholders at the IPO stage, thereby improving market efficiency. We argue that extensions that comply with such charter provisions should be insulated from entire fairness review.

A Corporate Governance Solution to the Inefficiencies of Entire Fairness

A Corporate Governance Solution to the Inefficiencies of Entire Fairness

'Unnecessary Peril': MFW Creep, the MFW Tax, and the Future of Entire Fairness Review in Conflicted Controller Transactions

'Unnecessary Peril': MFW Creep, the MFW Tax, and the Future of Entire Fairness Review in Conflicted Controller Transactions

The American Misconstruction of Director Fiduciary Accountability

Modern English and American corporate law was broadly fashioned in the nineteenth century. Oddly however, the courts of those two closely linked jurisdictions developed profoundly opposed views on a most basic matter. After some initial conflict in the cases, the English settled on the principle that directors are status fiduciaries only to their corporation. The Americans, with a comparable initial conflict in their cases, instead eventually settled on the notion that directors are status fiduciaries to shareholders. I track how that difference developed through the course of the nineteenth century. I also trace how fairness wrongly became an element of the American duty. Director fiduciary duty, director duty to shareholders, corporate personality, joint stock company, centralised management, entire fairness, director duty to creditors

SPAC Governance: In Need of Judicial Review

This paper analyzes the relationship between the economic structure of a SPAC, its corporate governance, and judicial review of SPAC mergers (or deSPACs). The core challenge for SPAC governance is to address the inherently conflicting interest of a sponsor and public shareholders. SPACs respond to this conflict by holding proceeds of their IPOs in trust and by granting public shareholders a right to redeem their shares for a pro-rata portion of that trust. For the redemption right to be effective, however, a SPAC's board must provide shareholders with accurate and complete information regarding the merger. Doing so may conflict with the interests of the SPAC’s sponsor, which will profit substantially even in a deal that is bad for SPAC investors. The independence of a SPAC's board is thus necessary for a SPAC to be governed in the interest of shareholders. Unfortunately, SPAC directors often have financial ties to a sponsor and are compensated in ways that align their interests with those of the sponsor. Where this is true, and where SPAC shareholders file suits alleging a breach of the duties of loyalty and candor, a court should affirm that the board has a duty to provide shareholders with the information they need to exercise their redemption right, and review the conduct of the sponsor and the board under an entire fairness standard.

SPAC Attack: An Examination of SPAC Director Compensation and Its Legal Implications

Special Purpose Acquisition Company (“SPAC”) directors are compensated with economic ownership of founders shares, shares which have value if the SPAC combines with an operating business and which expire worthless if that does not occur. By analyzing the public filings of the 248 SPACs that IPOed in 2020, I create a dataset of SPAC director compensation, which is the first of its kind. I find that a director of the median SPAC receives approximately 30,000 founders shares (estimated value $300,000) and a director of the average SPAC receives approximately 40,000 founders shares (estimated value $400,000). I then demonstrate how the current director compensation subjects SPACs and their directors to greater litigation risk under Delaware law. Specifically, SPAC directors may not be considered independent under Delaware law because of the structure and quantum of compensation via founders shares. Furthermore, under Delaware law, if SPAC directors are not independent, legal claims surrounding the SPAC merger may be examined under the exacting entire fairness standard rather than the deferential business judgement rule because potential procedural safeguards of the SPAC, such as the shareholder vote, may not be sufficiently “cleansing.” Finally, I propose changes in SPAC director compensation to improve director independence.

A Fair Price and a Fair Deal: On the Future of 'Entire Fairness' in Freezeouts

Controlling shareholders can compel the sale of minorities’ shares in freezeouts, potentially to their financial detriment. To limit controllers’ opportunism and support the value of minorities’ investments, the Delaware supreme court has endorsed strong minority shareholder protections under the rubric of 'Entire Fairness' – the governing standard for cash-out mergers. However, the court of chancery has refused to apply Entire Fairness to tender offer freezeouts, and is advocating unifying freezeout doctrine around a looser, deferential standard of review. The influence of popular and Congressional concern over excess plaintiff lawyers’ fees and discovery costs is likely making itself felt, although the true extent of these litigation agency costs is unknown and likely overstated. This influence is evident in three recent court of chancery cases analyzed herein (Pure, Cysive and Cox), which advocate lesser scrutiny of controllers’ transactions. There are several problems with the court of chancery’s proposed reforms, including that they conflict with Delaware supreme court precedent. A fair price duty is crucial to minorities’ bargaining leverage with controllers, and controllers’ power financially to oppress minorities if their freezeouts are thwarted ('inherent coercion') remains a genuine concern for equity. Lack of minority consent is still a problem that equity should be responsive to. This Article presents the case for applying Entire Fairness review to cash-out mergers and tender offer freezeouts. The sole exception should be when a controller authorized an independent committee to conduct an auction or market check and agreed to sell if a substantially higher offer for the company surfaced.

The Independent Board as Shield

The fiduciary duty of loyalty bars CEOs and other executives from managing companies for personal gain. In the modern public corporation, this restriction is reinforced by a pair of institutions: the independent board of directors and the business judgment rule. In isolation, each structure arguably promotes manager fidelity to shareholder interests—but together, they enable manager prioritization. This marks a particularly striking turn for the independent board. Its origin story and raison d’etre lie in protecting shareholders from opportunism by managers, but it functions as a shield for managers instead. Numerous defects in the design and practice of the independent board inhibit its ability to curb managerial excess. Nowhere is this more evident than in the context of transactions that enrich the CEO. When executive compensation and similar matters are approved by independent directors, they take on a new quality: they become insulated by the business judgment rule. This rule is commonly justified as giving legal effect to the comparative advantage of businesspeople in their domain—in determining the price of a product, for example—and it immunizes such decisions from court challenge. But independent directors can opt to extend the rule’s protection beyond this narrow class of duty of care cases to domains that squarely implicate the duty of loyalty. The result is a shield for conflicts of interest that defeats the major objective of the independent board and important goals of corporate law more generally. This Article proposes to eliminate the independent board’s paradoxical shield quality by ending business judgment protection for claims implicating the duty of loyalty. Judges would apply the familiar entire fairness standard instead. The clearest rationale for this reform comes from the logic of the rule itself: comparative advantage. Judges, not businesspeople, are best situated to adjudicate conflicts of interest. More broadly, the Article’s analysis suggests that the pro-shareholder reputation of the independent board is overstated and may have inadvertently fostered a sense of complacency around board power.

Corporate Control and the Limits of Judicial Review

Companies with a dual-class structure have increasingly been involved in high-profile battles over the reallocation of control rights. Google, for instance, sought to entrench its founders’ control over the corporation by recapitalizing from a dual-class into a triple-class structure. The CBS board, in contrast, attempted to dilute its controlling shareholder by distributing a voting-stock-dividend that would empower minority shareholders to block a merger it perceived to be harmful. These cases raise a fundamental question at the heart of corporate law: What is the proper judicial response to self-dealing claims regarding reallocations of corporate control rights? This Article shows that the reallocation of control rights raises an inevitable tradeoff between investors’ protection from agency costs and the controller’s ability to pursue its idiosyncratic vision, making the value of different allocations of control rights both firm-specific and individual-specific. It is thus inherently impossible to create objective valuation models for reallocation of control rights. The impossibility of creating reliable valuation models sets the limits of judicial review: The legal tools long used by Delaware courts to adjudicate conflicts over cash-flow rights, such as entire fairness review, are fundamentally incompatible with the adjudication of conflicts over reallocations of control rights. This Article explores the policy implications of this insight and suggests that courts treat reallocations of control rights as questions of charter interpretation as to who has the power to decide on reallocations of control rights, and avoid reviewing the discretion to use that power. Courts should enforce the decision of the parties as to reallocations of control rights and apply the business judgement rule where the charter is silent.

Farewell to Fairness: Towards Retiring Delaware's Entire Fairness Review

This Article entertains the idea that Delaware’s corporate law is set on a trajectory that would eventually lead to reforming its doctrine of entire fairness as we now know it by retiring the doctrine’s substantive fairness review prong and insisting on fully-informed consent as the only way for validating tainted transactions. A growing array of cases, in which the centerpiece is Kahn v. M&F Worldwide Corp. (MFW), creates a legal sphere within which traditional entire fairness analysis has no application. Within this sphere, things rise or fall depending solely on the existence or absence of an uncoerced fully-informed ratification, in line with fundamental principles of fiduciary law in Delaware and in other common law jurisdictions. The critical move, which may take time to materialize, will take place when the courts abolish substantive fairness review entirely. Treating this development as highly desirable in principle, this Article discusses practical and normative issues that call for attention in order to ensure its successful functionality. As this trend is premised on fully-informed consent, its principal challenge will be to ensure the integrity of shareholder voting by securing the supply of full information throughout the process and minimizing the impact of potential conflicts.

차입매수(LBO)의 공정성과 이사의 책임

LBO에 관한 법적 규제는 법적으로 허용되는 LBO와 그렇지 않은 LBO를 구별할 수 있는 기준을 마련하는 것이 급선무이다. 즉 투기적이고 탐욕적인 LBO는 규제해야 되지만 창의적이고 도전적인 LBO는 최대한 허용해야 하는 것이 경제계의 오래된 요청이다. LBO는 본질적으로 고도의 위험을 수반하는 거래이기 때문에 이를 규율하는 법률적 환경이 명확하고 안정적이어야 LBO가 활성화될 수 있다. LBO는 대상회사에 대한 인수자금을 그 회사의 자산 등을 담보로 제공하는 형태로서 인수와 합병, 구조조정과 같은 과정을 거치게 되므로 당사자 간의 이해충돌과 법적 갈등이 생기는 것은 거의 필연적인 수순이다. 당사자 간의 이익충돌은 인수인과 대상회사 또는 인수인과 대상회사의 소수주주 및 채권자 사이에 생기는데, 이들의 이해관계를 조절함과 아울러 LBO로 인하여 피해를 입는 자의 이익을 보호하는 것이 LBO의 핵심적인 내용이다.

Judicial Deference, Procedural Protections, and Deal Outcomes in Freezeout Transactions: Evidence from the Effect of MFW

For several years, merger freezeouts were invariably subject to entire fairness review, a demanding standard of judicial review that enables courts to revise the price of a transaction when the price is challenged by the shareholders of the selling company. But this changed in 2013. In an attempt to incentivize the simultaneous use of independent director approval and majority-of-the-minority conditions, the Delaware Chancery Court held in In re MFW Shareholders Litigation (2013) that when a merger freezeout is subject to those procedural protections, the transaction would subsequently be reviewed under the deferential business judgment rule rather than under entire fairness. This paper examines the impact of MFW on transactional practice and deal outcomes. The results show that majority-of-the-minority conditions increased significantly after the opinion, from an incidence rate below 40% to a rate of more than 80%. Special committees were already the norm before 2013 and their incidence did not change after MFW. The increase in majority-of-the-minority conditions, however, was not followed by significant changes in deal premiums, target returns, changes from the controller’s first offer to the final offer, or deal completion rates. The results therefore suggest that deferential judicial review is an effective way to incentivize procedural protections in freezeout transactions and that the increase in shareholder approval conditions did not come at the cost of higher frustration rates. In addition, the results suggest that procedural protections and entire fairness review seem to have a similar effect on the gains of the target shareholders. Taken together, these results present an assessment of MFW in particular and also shed light on the role of shareholder voting in freezeout transactions more generally.

MOM Approval in a World of Active Shareholders

Majority of Minority (MOM) approval is a common mechanism used in many jurisdictions to control conflicts of interest in related party transactions. Recently, in M & F Worldwide, the Delaware Supreme Court held that MOM approval in a controlling shareholder freezeout shifted the standard of review from Entire Fairness to Business Judgement Rule. In this article, I investigate how MOM approval functions in the presence of active shareholders (both hedge funds and actively managed mutual funds). After reviewing the potential benefits and problems with MOM approval, I review the use of MOM provisions in controlling shareholder freezeouts in the U.S. between 2010 and 2017. I combine this with three case studies involving MOM approval: the Dell MBO; the Oracle/NetSuite merger; and the unsuccessful effort by the Dolan family to take Cablevision private in 2007. I then briefly consider a quite different sort of MOM approval: the EU Takeover Directive’s requirement that conditions mandatory freezeouts on achieving a very high level of ownership (90-95%), typically through a tender offer. The principal lessons of this investigation are ambiguous. First, I do not find significant evidence that the use of MOM conditions in Delaware has attracted the sort strategic behavior by hedge funds or actively managed mutual funds that transactional lawyers have worried about. Except for the 2007 Cablevision deal (an unhappy experience for both investors and the controlling shareholder), I have not found any cases in which shareholders have successfully used MOM provisions to block transactions. Second, as far as I can tell, the MOM condition also does not seem to do much good. I have not found any cases in which shareholders have successfully threatened to block a deal as a way of increasing the consideration paid by the controlling shareholder. Contrary to the hopes of optimists, the MOM condition does not seem to have empowered even large active shareholders to negotiate with controlling shareholders over price. Although it is possible that the MOM condition serves as a shareholder referendum on the performance of the special committee, there is little evidence that it has done so. Third, EU directive’s mandatory version of MOM (the 90-95% threshold for freezeouts) does seem to attract strategic investors who block transactions until they are bought out at a higher price. The lack of observable effects of MOM approval raise a question whether an independent special committee combined with MOM approval provides sufficiently robust protections of non-controlling shareholders to relieve Delaware courts of their traditional role in scrutinizing conflicted controlling shareholder transactions for Entire Fairness.

Be Careful What You Wish for: How Progress Engendered Regression in Related Party Transaction Regulation in Israel

The regulation of related party transactions (RPTs) is today the single most important yardstick for the quality of corporate governance systems. It is also one of the thorniest issues because RPTs are a well-documented cause of abuse by corporate insiders, yet they could be valuable and sometimes simply inevitable. This paper analyzes reform measures adopted in Israel with a view to improving corporate governance in general and RPT regulation in particular. Whereas one set of measures revolved around procedural safeguards based on disinterested informed approval (a property-like rule), another set purported to establish a Delaware-like business court that would implement an “entire fairness” review (a liability-like rule). The latter trend came to dominate the former notwithstanding applicable statutory and case law, thus engendering regression instead of progress in RPT regulation. This case suggests lessons for law makers, be they judges or legislators, who contemplate mimicking the “corporate capital of the world”.

An analysis of when the merger price is the best representation of fair value in an appraisal action

Delaware’s statutorily afforded right of appraisal is once again a hot topic. In an appraisal action, the Delaware Court of Chancery is charged with the task of determining the fair value of recently acquired Delaware corporations. However, the appraisal process is not an easy one, in no small part, to the inflexible statute guiding the appraisal procedure. The process is further complicated by the Delaware Supreme Court’s mandate that the Court of Chancery not to employ a bright line test in determining the fair value even for those transactions that were the result of a free and open market process. As a result, the courts are often left second-guessing a merger value that was the product of a fair merger process. I propose that in an arms-length third-party cash-out merger, the entire fairness standard of review is the appropriate standard to determine fair value within an appraisal action. A statutory safe harbor allowing the judiciary the opportunity to examine the process by which the target company and acquiring company arrived at the final merger value versus questioning the substance of the merger would serve the M&A and shareholder community well. In the absence of a legislative fix, the Court of Chancery has, at the least, provided buyers, sellers, and arbitrageurs alike, with scenarios that will likely result in the court determining that the merger rice is, in fact, the best representation of fair value. Essentially, when the inputs typically used by the court for determining fair value are in some way flawed, the court will likely conclude that the merger price is the best representation of fair value.

Entire Fairness: A Call to Preserve Delaware Doctrine

Appraisal arbitrage has been on the rise. Institutional investors — namely, hedge funds — buy into target companies after their merger announcements and bet on the price. By purposely taking a minority position, these funds proceed to court to obtain what they otherwise could not in the market: a “fair value.” Where there is no allegation of wrongdoing or injury, these plaintiffs nonetheless successfully divert deal value away from business combinations. Based on a misunderstood statute, appraisal arbitrage has exploded into a multi-billion dollar industry for large fund investors. In June 2016, amid growing concerns, the Delaware General Assembly amended § 262, Delaware’s appraisal statute. While the effort is a start, it can by no means be an end. This Note examines the development of appraisal arbitrage and calls for unification of two competing areas of law. Both common law fiduciary duties and statutory appraisals under § 262 would naturally fit under an entire fairness test. As such, the author argues that statutory implementation of the fair process standard follows from the principles of Delaware lawmaking and its deference to judicial expertise. As an example, the Note recommends a simple, but meaningful proposal, after which the General Assembly can model future changes.

(The Merger of Samsung C&T Corporation & Cheil Industries Inc. Under the U.S. Law)

Korean Abstract: 삼성물산과 제일모직의 합병이 미국에서 진행되었다면 (1) 이재용은 삼성그룹의 지배주주로서, 삼성물산의 이사들은 이재용의 특수관계인으로, 모두가 합병에 대하여 이해관계에 있다고 판단되었을 것이고, 합병과정에서 지배주주와 이사로서의 충실의무를 위반하지 않기 위해서는 (i) 합병절차 및 조건내용이 삼성물산의 소액주주에게 공정 (entire fairness)하였어야 하거나, (ii) 이재용의 이해관계에 대한 모든 사실을 공개하고, 이해관계가 없는 이사들의 승인을 득하거나, (iii) good faith에 의한 주주들의 승인을 득하였어야 한다. Entire fairness는 절차적과 거래조건 모두가 공정함을 요구하는데, 삼성물산의 합병은 일단 절차상으로 소액주주들에게 공정하다고 할 수 없어 보이며, 거래조건도 공정하다고 하기 어려워 보인다. 이사회의 사전승인역시 절차상의 부족함과 이사들의 이해관계여부가 불투명하고, 주총에서의 승인도 good faith 요건을 충족시키지 못하였을 가능성이 높아보인다. (2) 또한 합병전 삼성물산의 주식가격에 중요한 영향을 주었던 여러 경영행위에 대한 공시의무를 위반할 것으로 보이며, 그러한 경영내용이 투자자들의 투자결정에 중요한 내용으로 판단되어, 그러한 공시의무 위반이 증권사기법 위반으로 인정될 가능성이 높아 보인다. English Abstract: The 2015 merger of Samsung C&T Corporation and Cheil Industries were subjected to the U.S. laws, (1) Lee Jae Yong, as controlling shareholder of both companies, and the directors of Samsung C&T, as associates of Mr. Lee, would have been found to be interested in the merger, implicating duty of loyalty concerns. For the merger to survive duty of loyalty challenges from minority shareholders of Samsung C&T, (i) the merger need to have satisfied the entire fairness standard, (ii) after full disclosure of the facts relating to the interest of Mr. Lee, an approval of disinterested directors be obtained, or (iii) after full disclosure of the facts relating to the interest of Mr. Lee, an approval of the minority shareholders be obtained. The entire fairness standard requires fairness in procedure and the transactions. However, the merger process does not appear to have provided for procedural fairness safeguards mandated by the standard, nor the transaction terms appear to be fair to the minority shareholders. The approval of the merger by the board of directors did not take place upon full disclosure of the facts relating to the interest of Mr. Lee nor are the outside directors clearly shown to be disinterested. The approval of the merger by the shareholders also does not appear to have been given in good faith. (2) Samsung C&T, a public company, would have been subjected to disclosure requirements of certain material management decisions that depressed its share price in comparison to its competitors, under the Secuities Act and the Exchange Act and its failure to disclose such matters would likely be considered violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5.

The Importance of the Business Judgment Rule

Anyone who has had the opportunity to teach corporate law understands how difficult it is to provide a compelling explanation of why the business judgment rule (Rule) is so important. To provide a better explanation of why this is so, this Article takes the approach that the Aronson formulation of the Rule is not the proper starting place. Instead, this Article begins by starting with a close read of two cases that initiated the application of the Rule under Delaware law, the Chancery and Supreme Court opinions in Bodell v. General Gas & Elec. By taking this approach, the following insights into the Rule were discovered that may not have been so readily apparent if the starting point was Aronson.First, without the Rule, the raw power of equity could conceivably require all challenged Board decisions to undergo an entire fairness review. The Rule is the tool used by a court to restrain itself from implementing such a review. This is the most important function of the Rule. Second, as a result of equity needing to be restrained, there is no room in the Rule formulation for fairness; fairness and fiduciary duties must be mutually exclusive. Third, there are three policy drivers that underlie the use of the Rule. Protecting the Board’s statutory authority to run the company without the fear of its members being held liable for honest mistakes of judgment; respect for the private ordering of corporate governance arrangements which almost always grants extensive authority to the Board to make decisions on behalf of the corporation; and the recognition by the courts that they are not business experts, making deference to Board authority a necessity. Fourth, the Rule is an abstention doctrine not just in terms of precluding duty of care claims, but also by requiring the courts to abstain from an entire fairness review if there is no evidence of a breach in fiduciary duties or taint surrounding a Board decision. Fifth, stockholder wealth maximization (SWM) is the legal obligation of the Board and the Rule serves to support that purpose. The requirement of SWM enters into corporate law through a Board’s fiduciary duties as applied under the Rule, not statutory law. In essence, SWM is an equitable concept.

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מאמר זה בוחן את מקומו של יסוד ההגינות בחובת האמון בדין הישראלי לנוכח מגמה המזוהה במידה רבה עם בית המשפט הכלכלי - לקלוט, כביכול, מדיני החברות של דלאוור דרישה של מלאה ביישום חובת האמון של נושאי משרה ושל בעלי השליטה בחברה. ניתוח עיוני מצביע על העדיפות המוחלטת במידע שאמונאי (fiduciary) נהנה ממנה כלפי הנהנה וכלפי בית המשפט. עסקות בין אמונאי לבין נהנה, שעשויות להיות יעילות ולעתים הכרחיות, תלויות אפוא בהסכמה תקפה של הנהנה על בסיס גילוי מלא - לאמור, כלל של קנין ולא של אחריות. דיני האמונאות באנגליה ובארצות הברית אימצו גישה זו משכבר והם דבקים בה עד היום, למעט דיני החברות האמריקאיים. בדינים אלה גרמה תאונה משפטית להיווצרות הדוקטרינה של הגינות מלאה, אשר מעטים חולקים על נפסדותה. על רקע זה הדין הישראלי אכן דוחה כל אפשרות לבחון את הגינותה של פעולה של אמונאי כאשר מתעורר חשש שהיא נגועה בהפרת חובת אמון. הדרך היחידה להכשיר פעולה נגועה היא בהסכמה תקפה של הנהנה על בסיס גילוי מלא, ובחברה - באמצעות אורגנים נקיי-דעת המקיימים את חובת האמון שלהם. האווירה המשפטית, המקבלת באהדה את עיקריה המהותיים של דוקטרינת ההגינות המלאה הדלאוורית, מבטאת אפוא מגמה רגרסיבית לא-רצויה. This Article examines the role of the fairness element in the duty of loyalty in Israeli law in the light of a trend that is largely attributable to the Economic Department of the Tel Aviv District Court – to seemingly adopt from Delaware law a requirement of “entire fairness” in implementing the duty of loyalty of directors, officers, and controlling shareholders. A theoretical analysis points to the absolute informational superiority that fiduciaries enjoy vis-a-vis the beneficiary and the court. Transactions between fiduciary and beneficiary, that could be efficient and at times necessary, thus depend on the beneficiary’s valid, fully-informed consent – namely, a property rule rather than a liability rule. The fiduciary laws of England and the United States have adopted this approach long ago and adhere to it to this day, save for American corporate law. In the latter, a legal accident engendered the doctrine of entire fairness, which few dispute its undesirability. Against this backdrop, Israeli law indeed rejects any attempt to examine the fairness of fiduciary action that is suspect of being tainted by breach of loyalty. The only way to validate a tainted action is through the beneficiary’s valid, fully-informed consent. The “legal atmosphere” that favorably accepts the substantive elements of Delaware’s entire fairness doctrine thus represents a regressive, undesirable trend.

Deal Process Design in Management Buyouts

Management buyouts (MBOs) are an economically and legally significant class of transaction: not only do they account for more than $10 billion in deal volume per year, on average, they also play an important role in defining the relationship between inside and outside shareholders in every public company. Delaware courts and lawyers in transactional practice rely heavily on “market check” processes to ensure that exiting shareholders receive fair value in MBOs. However, this Article identifies four factors that create an unlevel playing field in that market check: information asymmetries, valuable management, management financial incentives to discourage overbids, and the “ticking clock” problem. Because this taxonomy of four factors is mutually exclusive and collectively exhaustive, it allows special committees and their advisors to assess the degree to which the playing field is unlevel in an MBO. This Article then identifies more potent deal process tools that special committees can use to level the playing field: e.g., contractual commitments from management that allow the board to run the process; pre-signing rather than post-signing market checks; information rights rather than match rights; ex ante inducement fees; and approval from a majority of the disinterested shares. This Article also identifies ways that the Delaware courts can encourage the use of these more potent devices when appropriate, through the threat of entire fairness review and the application of Revlon duties. The result would be improved deal process design in MBOs and improved capital formation in the economy overall.