Regulatory: Mergers and acquisitions and the duty to update

Projections often change between the proxy statement filing and the shareholder vote

Ongoing litigation around recent acquisitions highlights the difficult disclosure decisions that public companies face, particularly with regard to the duty to update prior public disclosure in mergers and acquisitions.

In mergers and acquisitions, the difficult disclosure decision generally relates to new information about the target. When the acquirer files its proxy statement for the deal with the Securities and Exchange Commission, its expectations for the target company are based on information available at the time. The acquirer will share with investors the expected impact the deal will have on earnings and the acquirer as a whole. However, it is not uncommon for new information to surface about the target company, sometimes just days before shareholders are scheduled to vote on the proposed transaction. This changes the acquirer’s projections on the impact of the transaction, making the acquirer’s earlier statements in the proxy statement inaccurate.

Contributing Author

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Peter Fetzer

Peter Fetzer is a partner with Foley & Lardner LLP and focuses his practice on securities regulation, mergers and acquisitions, corporate governance and general corporate...

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