Professor Bainbridge...on law, politics, religion, culture & food

Omnicare v. NCS Healthcare: The precommitment issues

In class yesterday, we tackled the Delaware supreme court's decision in Omnicare v. NCS Healthcare, 818 A.2d 914 (Del. 2003), in which the Delaware supreme court held that an exclusive merger agreement -- such as a no shop or best efforts clause -- must include a fiduciary out, at least where the agreement presents target shareholders with a “fait accompli.” No Delaware court has yet offered a persuasive reason for their hostility to no shop clauses and the like. Instead, the invalidity of such strategies has been asserted by mere fiat. If Omnicare proves anything, it proves that the Delaware supreme court's fiat is not infallible.