Dealmaker's Digest: A Top 10 Bulletin - March 2025

Proposed DGCL Amendments

• Delaware legislators recently proposed significant changes to the Delaware General Corporation Law (DGCL). The amendments, known as Senate Bill 21 or SB21, focus principally on how Delaware courts should evaluate transactions involving controlling stockholders, although they also address questions of director independence and the proper use of pre-suit Section 220 books and records demands.
  
  • The bill has generated enthusiastic support, particularly from resident corporations and their advisors, for facilitating transaction planning and clarifying questions around corporate governance, director appointments and conflicts cleansing, among other issues.
  • Equally passionate opposition to the bill has emerged from the plaintiffs’ bar and shareholder advocates, including claims of legislative aggrandizement and judicial interference. Discourse around SB21 dominated the Tulane-hosted Corporate Law Institute conference in early March, which convened current and former members of the Delaware judiciary, corporate practitioners, plaintiffs’ lawyers, academics and other stakeholders.
• Lawmakers have incorporated several incremental changes to SB21 in the weeks following its initial dissemination. Further changes to the bill are possible, particularly given ongoing (and vociferous) lobbying.
• Bird’s-eye takeaways from the proposed amendments (as of press time) follow. For more information on these evolving developments and how they may impact your organization, please contact your usual Ropes & Gray attorney or reach out to a member of our M&A team.

Controlling Stockholder Transactions

• Controlling stockholder “going private transactions”—defined with reference to Section 13e-3 transactions in which a controller acquires the shares of a Delaware corporation they do not already own—would still presumptively be reviewed under the heightened “entire fairness” standard, unless conditioned on the “MFW factors” (approval by a majority of unaffiliated stockholders and a fully empowered and independent special committee). SB21 would, however, relax several stringent procedural elements imposed by Delaware caselaw. For instance, Delaware courts currently require that the MFW factors must be in place at the outset of substantive economic negotiations. Many otherwise MFW-compliant transactions have been subjected to entire fairness review because a court concluded that the parties did not comply with this “ab initio” requirement.
• For controller transactions that are not “going private transactions,” the parties would be able to obtain deferential “business judgment” review by adopting only one of the MFW factors, which also overrules recent Delaware Supreme Court precedent.

Other Key Changes – SB21 would:

• Codify who can properly be considered a controlling stockholder, which has been the subject of substantial litigation in recent years, and eliminate controllers’ liability for breaches of the duty of care.
• Generally make it more difficult for stockholders to plead that directors are conflicted.
• Seek to rein in the current practice of stockholder plaintiffs pursuing extensive pre-complaint discovery (including emails and text messages) through the use of Section 220 books and records demands and then leveraging those documents to bolster their complaints.

Antitrust Outlook

• Early signals from the second Trump administration suggest a nuanced outlook for antitrust enforcement and regulatory scrutiny of deals.
• New agency heads have endorsed Biden-era rules and guidelines, which require merging parties to invest more time and effort when seeking antitrust clearance, and have expressed support for the Biden administration's aggressive approach to antitrust enforcement. Unlike the Biden administration, however, we expect the Trump 2.0 agencies to entertain remedies to resolve concerns short of litigation.
• Enforcement against big tech, “killer acquisitions” and vertical deals were all in focus under the last Trump administration and remain so under Trump 2.0. Acquisitions in the pharmaceutical and medical device spaces, including those involving pipeline products, are likely to be areas of focus.
• On February 10, 2025, significant changes to Hart-Scott-Rodino Act (HSR) rules went into effect.
  
  • The new rules require merging parties to submit more transaction and industry-related documents, narrative descriptions on deal rationale and market overlaps, and lists of buyers’ key personnel and investors, making the process more complex and time-consuming.
  • The FTC estimates that preparing a filing will require an average of 68 hours of additional time for each party to a reportable transaction. In complex deals between competitors or companies in a vertical relationship, preparation time could be longer. This additional burden lengthens transaction timelines, and requires closer coordination among deal parties.
  • These changes are discussed in more detail in a recent episode of Ropes & Gray’s Antitrust Insights podcast series, available here. 

Deal Value Trends

After falling significantly in January, aggregate global monthly deal value¹ in February remained steady, up just 1% month-over-month. Total deal value was down 19% year-over-year.

Transactions involving strategic buyers in February held steady (up 1%) by deal value from January but declined significantly (34%) year-over-year.

Financial, or sponsor, buyer transactions were similarly flat month-over-month by value, up 2% from January. Sponsor buyer deal value increased 20% year-over-year.

Deal Count Trends

Like global deal value, month-over-month global deal count held steady in February, up just 1%. Year-over-year global deal count rose 10%.

Strategic buyer deal count in February increased 7% from January and 20% year-over-year.

Sponsor buyer deal count in February fell 7% from January and declined 4% year-over-year. In the last 13 months, sponsor deal count hasn’t fluctuated more than 14% month to month, hovering around 1,000 deals per month.

By Deal Count

• The software industry remained at the top for U.S. M&A activity by deal count in February, continuing its streak as the leading industry by volume.
• Services industries remained active, with financial services and other professional services rounding out the top three sectors in February by deal count.

By Deal Value

• The financial services industry topped the charts by deal value in February, with five announced transactions exceeding $1 billion.
• Software took second place in February by deal value, followed closely by acquisitions in the energy sector. 

Largest U.S. Strategic Deal

Herc Holdings Inc. has agreed to acquire H&E Equipment Services, Inc. in a cash-and-stock transaction valued at approximately $5.9 billion.³

Largest U.S. Sponsor Deal

Blackstone Infrastructure has agreed to acquire Safe Harbor Marinas, LLC in an all-cash transaction valued at approximately $5.65 billion.

Inbound U.S. M&A Activity

• By deal value, acquisitions of U.S. targets by non-U.S. acquirers decreased 11% from January to February. Year-over-year, inbound deal value dropped 38%.
• By deal count, inbound U.S. activity held roughly steady, decreasing just 4% month-over-month. Year-over-year, inbound deal count increased 33% from February 2024’s multi-year low.
• UK-based acquirers undertook the largest number of inbound transactions in February with 19 deals, followed closely by Canada at 17. Germany trailed with 8 deals.

Outbound U.S. M&A Activity

• By deal value, outbound activity in February increased 34% month-over-month but fell 10% year-over-year.
• By deal count, acquisitions of ex-U.S. targets by U.S. buyers increased 10% month-over-month. Year-over-year, outbound deal count was up moderately (6%).
• U.S. acquirers most frequently looked to UK-based targets in February, with 29 transactions. Targets in Canada and Germany trailed with 19 and 16 transactions, respectively.