Happy Monday. Here’s what we’ve got today…

• A look at the changing calculus on a once-standard legal framework in conflicted take-privates

• Plus, Apax could be nearing a deal for accounting firm CohnReznick

Sidestepping the minority:

Sponsors are reevaluating their legal strategy in conflicted take-private transactions after last year’s developments in Delaware case law.

For deals in which the acquirer is also a controlling shareholder—thus standing on both sides of the transaction—Delaware’s most onerous standard of review, entire fairness, applies by default.

In the event of a shareholder challenge to the transaction, entire fairness requires defendants to prove fairness in both process and value. Given the high bar, defendants are unlikely to secure an early dismissal of claims in cases subject to entire fairness.

For that reason, a common strategy for such deals is to leverage a framework known as MFW (introduced in the 2014 case Kahn v. M&F Worldwide Corp.), which lets the acquirer avoid the ‘entire fairness’ standard by securing approval from both an independent special committee and a majority of minority stockholders (MoM).

MFW, though, comes with its own set of headaches: acquirers must declare their intent to adhere to MFW upfront and then spend the time and money required to secure minority shareholder approval, which can bring uncertainty at best and, at worst, effectively kill the deal.

Then, in 2024, MFW compliance became even more challenging.

In Match Group, the Delaware Supreme Court clarified that all members of a special committee (not just a majority) must be independent, and, in Inovalon, that disclosure of potential conflicts of interest by the target’s financial advisor was insufficient and invalidated the minority approval.

In response, some firms are now making the decision to abandon MFW altogether.

As an alternative, they’re choosing to pursue just one prong of the strategy—generally, the easier-to-achieve special committee approval.

Though the single-prong approach won’t let the defendant dodge the ‘entire process’ standard, it does shift the burden of proof to the plaintiff in the event of litigation.

In November, Paul, Weiss released data on the latest MFW usage trends.

The firm identified 19 sponsor-backed deals eligible for MFW between January 2023 and September 2024. During the first half of the period, around 63 percent (five of eight deals) implemented the full MFW framework, but only 27 percent did so in the second half (three of 11 deals).

Those that put in the extra effort for MFW may not have gotten much in return.

"While MFW compliance theoretically provides a path to [the less stringent standard of] business judgment review and early dismissal of stockholder suits, data suggests this benefit has proven largely illusory,” notes the analysis.

“Litigation rates show no meaningful difference between deals employing full MFW protections versus those using only a special committee - both approaches face legal challenges at similar rates."

Out of the firm's data set of sponsor MFW deals, eight transactions were challenged by stockholders. Of those, half had fully adhered to both prongs of MFW, and half had chosen only the special committee.

With no clear proof that MFW adherence actually deters shareholder challenges, the coming year may see more firms deciding to abandon the formerly consensus strategy.

"Deal parties may be uninclined to introduce the additional deal risk brought on by implementation of the MoM vote when the risk of costly, post-pleadings stage litigation remains relatively high, regardless of their implementation of the full MFW framework," notes Paul, Weiss.

• Apax Partners is in late-stage talks to acquire a stake in accounting firm CohnReznick at a valuation of around $2 billion, per the WSJ.

• Blackstone agreed to acquire Potomac Energy Center, a Virginia-based natural gas plant, for $1 billion.

• Abu Dhabi-based PureHealth Holding agreed to acquire a 60 percent stake in Greek hospital operator Hellenic Healthcare Group at a $2.3 billion valuation, with CVC Capital Partners retaining a 35 percent stake.

• Emerson Electric (NYSE: EMR) agreed to acquire the remaining 43 percent stake it doesn’t already own in Aspen Technology (Nasdaq: AZPN) for $7.2 billion, or $265 per share.

• Diversified Energy agreed to acquire Maverick Natural Resources, a Texas-based oil and gas producer, from EIG for $1.28 billion.

• ICV Partners agreed to acquire Environmental Remedies, a Hayward, California-based residential asbestos abatement services provider.

• Fremman Capital agreed to acquire Italian in vitro diagnostics provider Diesse Diagnostica Senese from ArchiMed for around €125 million.

• Inflexion has acquired a minority stake in accounting and professional services firm Baker Tilly Netherlands.

• Atlas Energy Solutions (NYSE: AESI) agreed to acquire Permian Basin-focused Moser Energy Systems from Hilltop Opportunity Partners and WestFront Capital Group for $220 million in cash and stock.

• Maze Therapeutics, a South San Francisco-based biotech backed by Third Rock Ventures and ARCH Venture Partners, set terms for a Nasdaq IPO that could value the company at $715 million.

• WH Smith (LSE: SMWH) is exploring the sale of its 500-store British high street retail business, which generated £32 million in operating profit last year, per Sky News.

• Regent is in advanced talks to acquire Foundry, a tech media publisher known for PCWorld and Macworld, from Blackstone's IDG.

• Northlane Capital Partners invested in Plus Delta Partners, a provider of fundraising training for nonprofits and educational institutions.

• Blackford Capital acquired Ace Controls, a Houston-based manufacturer of industrial control panels.

• Cision, owned by Platinum Equity, failed to reach an agreement with lenders to refinance its credit facility ahead of a repayment deadline.

• DirectMed Imaging, a Frazier Healthcare Partners portfolio company, acquired Richardson Healthcare, an X-ray tube repair business, from Richardson Electronics (Nasdaq: RELL).

• The Colt Group, a portfolio company of CapStreet, acquired RJ Stacey, a Michigan-based industrial repair services provider.

Tech, Vertical SaaS, & Misc. Enterprise

• Tive, a Boston-based supply chain visibility platform, raised $40 million in Series C funding co-led by WiL and Sageview Capital, with participation from AVP, RRE Ventures, Two Sigma Ventures, Qualcomm Ventures, Fifth Wall, Supply Chain Ventures, and Sorenson Capital.

• Optable, an identity management and data platform for advertising, raised $20 million in Series A Acceleration funding led by TELUS Global Ventures, with participation from Hearst Ventures, Brightspark Ventures, Desjardins Capital, Deloitte Ventures, and AsterX.

• Sightline, a climate tech market intelligence platform, raised $5.5 million in seed funding co-led by The Westly Group and Molten Ventures, with participation from AccelR8 and Red Sea Ventures.

• Mobility Mojo, a Dublin-based accessibility audit platform, raised €4.25 million in Series A funding from Gresham House Ventures.

Healthcare

• Allara Health, a virtual care provider for women with chronic hormonal conditions, raised $26 million in Series B funding led by Index Ventures, with participation from GV.

• Manas AI, an AI-driven oncology drug discovery platform, raised $24.6 million in seed funding co-led by General Catalyst and Reid Hoffman, with participation from Greylock.

• Gaia, a fertility prediction and IVF payment plans startup, raised $14 million in new funding led by Valar Ventures.

• Francisco Partners raised $3.3 billion for its third opportunistic credit fund.

• AXA IM Alts raised €4 billion for its commercial real estate debt platform.

• Harrison Street raised $600 million for its HS Digital Fund to invest in North American data center assets.

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