What’s going on here?
Private equity firm Silver Lake, holding 71% of Endeavor Group’s voting
stock
, is pushing through a $13 billion take-private deal without minority shareholder veto.
What does this mean?
By excluding a ‘majority-of-the-minority-investors’ vote, Endeavor Group’s deal can proceed without obtaining broader shareholder consent, a tactic seen in recent US transactions like Thomas H. Lee’s $2.5 billion Agiliti purchase and BDT Capital’s $3.7 billion Weber acquisition. Experts argue the financial benefits of bypassing minority votes often outweigh legal risks. However, omitting these votes can affect valuations—potentially leading to lower premiums as seen with Delaware court practices, which may mandate an extra 5% to 10% payout if votes are skipped.
Why should I care?
For markets: A balancing act in valuations.
While avoiding minority shareholder vetoes can streamline deals, it could also imply reduced premiums, impacting overall market valuations. Investors might anticipate lower returns on transactions, affecting their market strategies and investment decisions.
The bigger picture: Navigating legal risks and shareholder dynamics.
Handelsbanken’s lawsuit against Endeavor, claiming undervaluation due to the exclusion of a shareholder vote, highlights the delicate balance companies must maintain. Meanwhile, firms like Squarespace are opting for minority approval to mitigate legal risks and ward off activist disruptions, demonstrating the diversity in approaches and the underlying strategic calculations.
