The court concluded that the holdings of Dell and DFC Global instructed it to rely on the unaffected market price rather than either of the competing DCF analyses or even the court's own analysis of value minus synergies. The court began with the principle that Dell and DFC Global cautioned against relying on DCF analyses prepared by adversarial experts when reliable market indicators of fair value are available (DCF analyses being better for appraisal proceedings when the company was not public or was not sold in an open market check). The court held that the same concept applies when the court must back synergies out of deal value, in that neither DCF analyses nor the court's own estimate of synergies should be relied on when an efficient market provides evidence of what the company's fair value without synergies was.

The court added that it would be inappropriate for it to use its own valuation of $18.20 per share because that valuation would still involve reliance on an element of value derived from the merger itself, that being the reduction of agency costs. Although this might imply that the court should apply a minority discount to fair value as a matter of course—which would be inconsistent with Delaware precedent—the court explained that a minority discount is only inappropriate in cases involving a controlling stockholder. However, where there is no controlling stockholder, the benefits of control arise from the accomplishment of the merger itself and are therefore statutorily excluded from fair value in the same way that synergies are.

The Aruba Networks decision, if upheld (and perhaps in the interim until an appeal is decided), has the potential to put a stop to much of the appraisal litigation that has become increasingly common in Delaware. The decision creates a risk for appraisal arbitrageurs and other dissenting stockholders that their floor in appraisal litigation is not merely the negotiated deal price, but a price as low as the unaffected trading price of the shares if the deal involves significant synergies.

Practitioners should note that the decision cannot be read as endorsing a bright-line test between deals with strategic and private equity buyers. For one, it would be very much unlike the Delaware Supreme Court to endorse that sort of test rather than taking the facts of each deal as they come. In addition, the assumption that only deals with strategic buyers involve synergies is not correct. Although the term "synergies" implies value derived from a combining of operations between the target company and a strategic buyer, the Delaware judiciary has held that if a private equity buyer pays a price that implies speculative elements of value that arise only from the merger, the court must exclude those elements as well (Huff Fund Inv. P'ship v. CKx, Inc., , at *2 (Del. Ch. May 19, 2014), aff'd, (Del. Feb. 12, 2015)).

It is also worth noting that the decision seemingly opens the possibility for gaming the wording around the deal to ward off potential appraisal litigation. If the deal involves a significant premium to market, the parties may now have an incentive to attribute that premium to synergies, thereby creating a risk for dissenting stockholders that they will ultimately be awarded no more than the unaffected market price.

Beyond the issue of synergies, however, the Aruba Networks decision can be read as dictating that the unaffected market price is always the most reliable indicator of fair value. This is because the Chancery Court held that the negotiated deal price necessarily includes value for reduced agency costs. These costs, according to the court, cannot be separately calculated and backed out of the deal price. Because reduced agency costs are extant in deals with no controlling stockholder, there should ultimately be no deal in which deal price is the most reliable indicator of fair value according to the Aruba Networks decision (either there is a controlling stockholder, in which case the deal price is not reliable, or there is no controlling stockholder, in which case there are reduced agency costs). This is a question that the Supreme Court will have to clarify.

The decisions in Dell and DFC Global had made it seem unlikely that Delaware courts would ever again use DCF analyses in any cases involving public company mergers with no controlling stockholders. The Chancery Court's decision in AOL shows that there is a still a place for DCF analysis and that the deal price will not always be the default measure of fair value, even in arm's-length deals.

The fact that the CEO's interview on CNBC was enough for the court to disregard the deal price altogether is somewhat stunning. AOL was a well-known public company and the merger agreement was utterly ordinary for public deals, yet the court gave the price no weight as if the sale process had been hopelessly tainted. Practitioners should use AOL as Exhibit A in instructing CEOs of target companies to never say the deal is done until it is actually closed. CEOs and other board members should always make clear that they are aware of their fiduciary duties to the stockholders and will consider the potential superiority of competing offers.

The decision also presents something of a challenge in terms of reconciling it with Aruba Networks on the question of reliance on deal price. The court in Aruba Networks itself acknowledged that a DCF analysis is appropriate when the company was not sold in an open market check. Thus, the court's decision in AOL to employ a DCF analysis once it decided that the deal process was not Dell compliant cannot be said to directly contradict the decision in Aruba Networks. Yet the court in Aruba Networks did conclude that a deal price significantly above the prevailing market price of a stock that trades in an efficient market itself provides evidence of fair value. The court in AOL certainly did not see things the same way. Though the court maintained that the situations were not the same because the litigants in AOL did not argue for or against using the unaffected trading price, this distinction seems only to reflect that counsel did not have the benefit of Aruba Networks when they were arguing AOL.

On substantive grounds, though, the only difference between the two cases would be that the efficiency of the market for AOL's shares had not been established the way the market for Aruba Networks' shares was. Yet it seems a stretch to argue that the shares of AOL did not trade in an efficient market. The conflict between the two decisions would appear to be more doctrinal than factual, and the question of when a deal premium itself provides evidence of fair value will have to be answered at a later time.

The order by the Supreme Court to affirm SWS seemingly indicates its agreement with the idea echoed in AOL that the negotiated deal price is appropriately excluded from consideration altogether when the deal is not the result of an arms' length, competitive process, as opposed to giving the deal price some measure of weight. Whether the Supreme Court will ultimately agree that when synergies must be excluded, the unaffected market price of the company's shares provides a better indication of fair value (as explicitly held in Aruba Networks) than an independent DCF analysis undertaken by the court (as was performed in SWS) is the newest major question in Delaware appraisal law.

No matter the ultimate resolution by the Supreme Court (or, for that matter, by the Delaware legislature), the very fact that three high-profile decisions in rapid succession awarded petitioning stockholders less than the negotiated deal price is likely to have a chilling effect on appraisal arbitrage. Arbitrageurs will likely to be reluctant to invest heavily in new target companies until there is more clarity on the question of fair value, while those stockholders with money already tied up in existing investments may seek settlements rather than see their cases go all the way to trial.