Steven B. Katz


The author analyzes the role of corporate boards of directors during takeover and control transactions, specifically in regards to auctions. Courts have consistently considered unfair auction attempts in light of the importance of the business judgment rule. The author examines Delaware case law and highlights the Revlon case, which holds that once an auction begins, the board’s duty shifts from preservation of the corporate entity to maximization of value shareholders will receive from the sale. The author argues that a good understanding of auction theory will not only give courts a better perspective through which to examine directors’ actions but also will give directors more information on how to run auctions and respond to bids.