August 16, 2018
Delaware saw its No. 2 ranking head south in the Thumbtack 2018 small business survey.Small business owners surveyed by Thumbtack, gave Delaware a B- this year, ranking 27th in a survey of business friendliness in all 50 states.Thumbtack is a website and app that finds local professionals.
That’s 25 spots lower than last year when the state ranked second and received an A+. Delaware scored higher than New Jersey (D+), but lower than Maryland (B+).
State leaders had been taking note of the positive 2017 findings from Thumbtack as surveys from CNBC and others gave Delaware low business rankings.“The biggest slip this year for Delaware was in its training and networking programs. In 2017, it received an A grade, with 27 pecent of our respondents saying that they or their business had benefited from a training or networking program,” Thumbtack economist Lucas Puente, stated in an Email message. “However, this year, only 10 percent of the small business owners we heard from had used such a program. This drop in usage led the state to get an F for its training and networking programs this year.”
Another noticeable decline came in tax regulations Puente noted Last year, 45 percent said that tax-based regulations were friendly towards small businesses; this year, only 34 percent did.
Its 2018 Small Business Friendliness Survey, ranked all 50 states and 57 cities based on factors that included licensing requirements, tax regulations, and labor and hiring regulations. With over 7,500 small business owners surveyed, it’s the largest continuous study of small business perceptions of local government policy in the U.S, according to a release.
Based on the evaluations in surveys, Thumbtack also assigned eight policy-specific grades to evaluate how easy local governments make it to start, operate, and grow a small business. For more details about the report and the full set of results for Delaware, please visit Thumbtack.com/DE.
It pains me to say this: But having covered the TransPerfect Global case closer than anyone for the last couple of years and talking to many employees who had their lives turned upside down by the Delaware Courts, I am happy to see the American success story known as TransPerfect finally being able to escape the tentacles of our Chancery Court and Chief Chancellor Bouchard. Thankfully, it wasn’t sold to a private equity shop, which may have laid off thousands of workers with the intention of trimming the company and flipping it a few years later. Ultimately, the employees won, and jobs were not lost. But at what price? Did the Court of Chancery really do equity here by causing the litigants to incur $250 million in fees to resolve ownership of a company that does $600+ million in revenue? It would take years for the company to recoup those costs! It’s obscene, it’s outrageous and in my opinion — nothing less than a money grab by the Delaware Bar and what amounts to State sanctioned theft. Why would corporations want to incorporate here when they start to realize that their biggest business losses can occur when they try and get something done in Delaware. Let’s be clear folks: The greed of the Delaware judiciary and its lawyers have made Delaware a “business unfriendly” state. The only people who won here were lawyers, Delaware elites, and those hired by them. The legislature should form a special committee to investigate the whole TransPerfect case so that the Delaware attorneys and Chancellor Bouchard can explain their actions and open their books to the public (which they have shockingly refused to do to date ). In order to survive, Delaware needs transparency, now! When litigants come to Delaware and see Chancellor Bouchard pulling up in his Bentley, they will probably be thinking about the TransPerfect case. Reading the piece below about TransPerfect moving its corporate headquarters from Delaware to Nevada, I thought, bravo TransPerfect! Very smart for those guys to get out of the state where we have no checks and balances on the judiciary’s power. I mean, the Chief Justice of Supreme Court was Bouchard’s summer intern! I am erxtremely sad for Delaware, but overjoyed for TransPerfect. TransPerfect employees and shareholders weren’t the only losers here. What Delaware lost and is losing in our reputation and our image is priceless. Frankly, in my view, it is lost at the hands of a greedy bunch of powerful cronies who have the ability to bleed companies and their shareholders dry. Judges who legislate from the bench and have relationships with attorneys, creates the appearance of an impropriety and all the while, it seems our elected officials just stand by and do nothing. If you followed the recent Facebook case in Delaware, the fees requested in that case were $129 million! We have reached a seminal moment for the Delaware judiciary and for the people of this great State! Can the corruption run any deeper? Under the leadership of Chief Chancellor Bouchard, our state fell from #1 to #11 after 15 years of dominating the corporate confidence survey and I’m worried that the Delaware Bar Association and Delaware’s Supreme Court will continue to turn a blind eye as more and more corporations question the reliability and impartiality of the Delaware Chancery. The story below says that TransPerfect Global and 7 of its operating subsidiaries have moved to Nevada. The move has been called “Dexit”, as in Delaware-exit. Some of TransPerfect’s employees in my 6,000+ readership-base think I’ve been their only voice, yet now I ask them to be my voice: To the employees and to TransPerfect CEO Phil Shawe, I say this: I understand why you’re leaving — if someone took a quarter-billion from me, I’d leave too — but stay! Please don’t turn tail and run now that you’ve won. Delaware is a good state with good people. You are the only business people who are bold and dogged enough to challenge the cronyism that is rampant in Delaware, and to possibly get legislation passed that will reform a judiciary gone amok. With you leaving, what about the rest of us? You have the means and the motivation to make a real difference here — to save Delaware from itself. How will you feel when the next $100 million in legal fees is awarded? Beyond Delaware, think about how many future management teams and shareholders you can save from the heinous, legal crap that befell you at a cost of millions of dollars. Speaking for Delawareans as a whole, we don’t want more private jets for plaintiffs attorneys and Bentleys for judges. We want change and we want our reputation back. Consider coming back to Delaware and being part of the solution? Now that you have nothing to gain or lose, perhaps our legislators will listen. Please read the article below.Industry News
by Andrew Smart on August 13, 2018
TransPerfect wasted no time in moving its corporate domicile from Delaware to Nevada once the deadline for Co-founder Liz Elting to file an appeal with the U.S. Supreme Court passed on August 1, 2018, without incident.
The move puts closure and distance between the world’s largest language service provider (LSP) and the Delaware Court of Chancery, which had appointed Custodian Robert Pincus to auction the company.
TransPerfect Co-founder Phil Shawe eventually won the competitive auction process and completed the buyout in May 2018, enabling the company to restart acquisitions and relocate to Nevada.
Expensive Litigation
For four years beginning 2014, the legal battles for control of TransPerfect were amongst the most acrimonious seen in American corporate history. While Shawe declined to comment on the legal and custodian costs for this story, Crain’s reported that USD 250m in legal fees were spent by all parties on at least 20 lawsuits involving 30 law firms.
The Court of Chancery in Delaware, where TransPerfect was domiciled, would take center stage in these battles. In June 2016, it ruled that the company would be sold in an auction in which Shawe would be forced to participate while he contested its legality at the same time.
The auction began with 97 potential participants, ran four bidding rounds and ended with Shawe securing the bid for USD 770m in a neck-and-neck finish with H.I.G. Capital, the private equity owner of Lionbridge.
In an email statement to Slator in May 2018, Shawe said “Personally, I feel both pleased and vindicated to have won the auction and to now be in a position to ensure that TransPerfect’s successful business model will be maintained into the foreseeable future.”
Debt Financing
Shawe purchased all of Elting’s shares for USD 385m in cash, yielding her about USD 287m in after-tax net proceeds. “TransPerfect and I used Owl Rock’s debt financing to buy out my former partner,” Shawe confirmed to Slator for this story. He declined to provide the type and amount of debt raised.
Shawe added that “Property rights advocates should perhaps be happy to know that TransPerfect’s third shareholder, Shirley Shawe, was, in the end, able to keep her (1%) stake in the company – private property which she feared could have been taken by the government, against her will, and sold to a third-party – a litigation outcome unprecedented in U.S. history for a private, profitable firm.”
With the purchase approved by the Delaware Supreme Court and completed in May 2018, Liz Elting had until August 1, 2018 to file an appeal with the United States Supreme Court. The deadline passed and TransPerfect wasted no time moving its corporate domicile to Nevada.
TransPerfect’s Dexit
Shawe confirmed to Slator that “as of August 6th, our parent company, TransPerfect Global, Inc. and all seven of its operating subsidiaries which were domiciled in Delaware, have moved to Nevada.” The move has been called “Dexit” by insiders.
“For years, most companies – including ours – considered Delaware the default option for incorporation” Shawe told Slator. “But times and circumstances have changed and other states, Nevada chiefly among them, now represent a compelling alternative.”
He added that “Nevada has a reputation for low taxes, privacy, lower litigation costs, a rational and predictable judiciary, as well as for protecting officers, directors, managers, employees and stockholders. It is an extremely business friendly locale.”
A Return to M&A
TransPerfect has emerged as a formidable player in the language industry, with revenues up 12% to USD 615m in 2017. Even more remarkably, the company managed to organically grow revenue by nearly 20% to USD 337m in the first half of 2018.
The growth, according to Shawe, is broad based across “every industry vertical we service. We’re also seeing significant growth in both our services and technology revenue streams. Geographically, it’s the same story, the Americas, Europe, and Asia are all up compared to last year.”
“If we had an extremely compelling use of funds, we’d raise the capital necessary, either in the private or public markets”
When asked if M&A would also be part of its growth strategy going forward, Shawe replied “Yes. We are looking for M&A candidates in the services space (…). In the technology space, we are looking for strategic software purchases that would fit well in our existing technology stack.”
Less certain is whether TransPerfect will go public and use its shares as a source of capital in acquisitions as RWS, Keywords Studios and SDL have done.
“We’re more apt to view ‘going public’ as we would any other means of raising capital” said Shawe. “If we had an extremely compelling use of funds, we’d raise the capital necessary, either in the private or public markets.”
ALM Media July 24, 2018
Tom McParland
Three law firms are pressing their case for $129 million in attorney fees in a shareholder suit over Facebook Inc.’s since-abandoned plan to reform its stock structure in a way that would have given founder Mark Zuckerberg more control over the company.
Attorneys from Wilmington plaintiffs’ firms Grant & Eisenhofer and Prickett, Jones & Elliott and Radnor, Pennsylvania-based Kessler Topaz Meltzer & Check defended the request in a court filing on Monday, saying Facebook’s eleventh-hour decision last year to scrap the reclassification plan had secured the full relief their clients had sought in the two-year-old lawsuit.
Counsel for Facebook, however, has said the proposed award was the second-highest ever requested in the Delaware’s Chancery Court and would “dwarf” fees in comparable cases.
Instead, the company said any fee award should not exceed $19.8 million.
The dispute hinges on the question of how to quantify the value of the plaintiff’s victory last year, which came just three days before a planned trial that aimed to put Zuckerberg on the stand. The share restructuring would have allowed Zuckerberg to retain his 60 percent voting power at Facebook, even as he made good on his promise to sell off his shares to charity. There was no dollar amount attached to the agreement, and both sides at the time refused to call what transpired a “settlement.”
Plaintiffs’ attorneys argued Monday that the move would allow shareholders to eventually take control of the Menlo Park, California-based social media giant, a benefit they said was worth $1.29 billion based on the company’s present value. “The real issue in dispute on this fee application is how does one value control of a $500 billion company,” the attorneys wrote in a brief in support of their motion. “Facebook cannot now retreat from Zuckerberg’s many uncontradicted public statements. Nor can it credibly claim that control of a $588 billion company does not have a multibillion dollar value.”
Facebook, which is represented by Ross Aronstam & Moritz, said in court papers last month that Zuckerberg has no intention of relinquishing control of the company for the foreseeable future, and there was no way to accurately determine the value of the termination.
Given the uncertainty, the company said, attorneys should be compensated based on the time spent working on the case. “Plaintiffs’ counsel now seek the second highest fee award in the history of this Court, and (by an order of magnitude) the highest fee award in any case not involving a certain and quantifiable monetary benefit,” Facebook’s lawyers wrote in a brief. “Under these circumstances, quantum meruit is the proper method for determining an appropriate fee.”
Facebook’s board approved the reclassification in 2016 as a mechanism to allow Zuckerberg to maintain control of the company after he had announced that he would donate 99 percent of his Facebook holdings to the Chan Zuckerberg Initiative, a philanthropic investment company run by Zuckerberg’s wife, Priscilla Chan. But investors quickly lined up to oppose the plan, arguing that it would grant Zuckerberg lifetime control of Facebook, while forcibly converting two-thirds of Class A stockholders’ equity interest to nonvoting Class C shares and depriving them of any influence over the company. In a complaint filed in May 2016, class attorneys called the plan a “fait accompli” for Zuckerberg and argued that it was a self-interested scheme approved by a conflicted board of directors.
With trial just days away, the company announced on Sept. 22 that its board had unanimously agreed to withdraw the reclassification plan.
In a post to his Facebook account, Zuckerberg said that the proposal to add a new class of company stock was “complicated” and that it “wasn’t the perfect solution.” However, he said that Facebook’s recent success would allow him and his wife to fully fund his philanthropy and maintain voting control for at least the next 20 years. And he announced that he planned to sell 35 million to 75 million shares in the next 18 months to fund contributions in the areas of education and science. “This path offers a way to do all of this, and I’m looking forward to making more progress together,” Zuckerberg said.
Briefing the plaintiffs fee request is now complete, leaving the issue to Vice Chancellor J. Travis Laster to decide. There was no word Tuesday on when the judge might rule.
The case is captioned In Re: Facebook Class C Reclassification Litigation.