What follows is not a checklist. Every one of these situations is different, and the ones that go well are the ones where the facts shape the process rather than the other way around. It is closer to the conversation a CEO and a general counsel might have in the first days, before anything is written down.
The approach rarely announces itself. Sometimes it is a sponsor over dinner saying the business would do better private. Sometimes it is a strategic acquirer’s corporate development head asking, after a partnership review, whether the board has ever considered a combination. Sometimes it is a large customer or supplier whose interest in the relationship has quietly become an interest in the company. And sometimes it is a letter from a fund that is about to cross a five-percent threshold and would like to discuss strategic alternatives. Nothing has been offered. Nothing has been refused. The chief executive is left wondering what, exactly, has just begun.
Conversations of that kind are more frequent this fall, for reasons the market has made plain. The median public software company is growing in the low teens, with a 22% cash margin and trades at four to five times revenue, and roughly half the companies that beat last quarter saw the stock go flat or down. When a beat does not move the price, the market has said what it thinks the standalone business is worth. Sponsors, strategics and activists all read that signal, and each has the capital or the leverage to act on it. If you run or advise a public software company under a few billion dollars of market value, some version of that call is likely in the next few quarters.
What follows is not a checklist. Every one of these situations is different, and the ones that go well are the ones where the facts shape the process rather than the other way around. It is closer to the conversation a CEO and a general counsel might have in the first days, before anything is written down.
Who Hears About It First, and How
The instinct after an approach is to do one of two things: hold it while you think, or call a banker. Both are understandable. Neither is where I would start.
In most public companies, the chief executive is also the chair, or effectively so, and the board’s independent voice sits with a lead independent director or a small group of senior directors. Those are the people who benefit from hearing early, informally, and from the CEO directly. Not because a rule requires it, though the lawyers will eventually find one, but because the most corrosive thing in these situations is a board that feels it learned late. Boards forgive a great deal. They do not forgive surprise. A short call to the lead director, a day or two after the approach saying here is what happened, here is what I said, here is what I did not say, and I would value your read, does more to protect a CEO than anything drafted afterward.
How that conversation goes will vary, and it should. Some lead directors will say, “interesting, let us see whether it develops.” Some will want a call to brief the full board. Some will want counsel in the room, and a strong banker. Any of those can be right depending on who is on the other side of the approach and how serious it appears. The point is not the choice. It is that the CEO and the independent directors are moving together, so that when the board does convene, nobody is hearing the story for the first time from someone who has already formed a view. And importantly, no one is taken by surprise.
The Nature of the Approach Shapes Everything After It
A sponsor, a strategic, a customer and an activist are asking for different things and carry different risks, and a process that treats them the same will fit none of them.
A financial sponsor might want management to stay and will, sooner or later, want to talk to management about its future. That is the conflict the board will have to manage. A strategic buyer may bring a higher price and a harder regulatory path, and the diligence it requests will touch commercial information the company would not ordinarily share with a competitor, which puts the general counsel in the middle of every data room decision. A customer or supplier approaching the company raises questions about the underlying commercial relationship, and about what happens to that relationship if the answer is no. An activist is not offering to buy anything; it is offering to make the board’s life difficult until the board does something, and the right response is often about engagement, disclosure and the shareholder base rather than about deal terms at all.
None of this argues for a particular structure. It argues for the CEO and the general counsel sitting down early with whoever the board trusts on these matters and asking a plain question: what kind of situation is this, and what does it actually require? The answer will be different in each case, and it will often change as the situation develops.
The CEO’s Role is to Keep Everyone at the Same Speed
The hard part for a chief executive is holding several roles at once. Steward of the company, which means the best outcome for shareholders. Leader of a management team that will be anxious the moment the rumor moves. And, in a sponsor deal, an eventual counterparty, because the buyer may want the CEO to stay, roll equity and sign new agreements.
Nobody expects a CEO to pretend that last role does not exist. What the board and, if it comes to it, the courts expect is that the CEO does not get ahead of the process. In practice, a few things tend to help. Let the board decide when management may begin discussing its own arrangements, and be visibly at ease with that. Keep the general counsel in every conversation with the other side, including informal ones. Resist the pull to negotiate price personally, however natural it feels, because a number that comes from the CEO is a number the independent directors must later explain.
The cautionary tale most of us still teach from is Mindbody (City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Stollmeyer, Del. 2024). The Delaware Supreme Court upheld a judgment against a CEO who had, in effect, opened the door to Vista before the board knew a sale process had begun.
He then let the board run that process without knowing what had already happened. Nothing about the case turned on bad intent. It turned on sequence. The CEO got ahead of the board. The board could not fix later what it had not known at the time.
A CEO who avoids that can look almost passive in the middle of the process. That is usually the sign it is working. The CEO’s credibility with the board is the company’s most valuable asset in any negotiation. The best outcomes come from CEOs who spend it carefully.
Build a Process the Facts Can Survive
No two boards handle this the same way, and there is no single right structure. Whether a special committee is needed at all, who should sit on it, whether the company’s regular advisers can stay, how formal the record ought to be, all of that depends on who is on the other side, which directors have relationships with them, where the company is incorporated, and how the shareholder base is likely to respond.
A controlling-stockholder take-private in Delaware still calls for both a fully empowered committee and a majority-of-the-minority vote, agreed at the outset.
Most other conflicted transactions now have a statutory safe harbor under the 2025 amendments to Section 144, which the Delaware Supreme Court upheld this February in Rutledge v. Clearway, and which asks for either an independent committee or an informed vote rather than both.
And the Court of Chancery’s first application of the new law this summer, in Ayers v. Foley, made clear that ordinary board service, business relationships and social ties do not by themselves make a director conflicted.
Delaware has, in other words, become more willing to trust a board that does the work.
A whole-company sale to an unaffiliated strategic may need far less than the full apparatus, and dressing it up beyond what it needs can slow things down and signal weakness.
In the first weeks, a good general counsel maps those facts candidly, including the awkward ones: Which directors know the counterparty, and how well? Might any of them have a continuing role after a transaction? Does the company’s banker cover the counterparty in a way that could color its advice? Were management’s projections prepared for this purpose, or are they the same ones the company runs on? Counsel can then shape a process that fits and write down why. The record need not be long. The road is easier when counsel can show that decision-makers saw the conflicts and addressed them.
I would add something about temperament, not law. The best counsel are the ones chief executives trust to be candid. That trust is built in the ordinary work before any approach, which is why I spend more time on governance between transactions than during them.
Advisers Should Leave the Board Better Than They Found It
Every process brings in bankers and lawyers, and every board has to decide how much to let them drive. My own view is that the best advisers are the ones who explain the trade-offs rather than impose a template. A go-shop after signing can be a genuine market check or a decoration, depending on the break fee, the matching rights, how the banker runs it and whether management is truly asked to cooperate. A contingent value right can bridge a real gap in expectations or be a side show that no one intends to execute. A majority-of-the-minority vote can protect a board completely or hand a hedge fund a veto. A standstill can buy time or foreclose a better answer.
None of these is right or wrong in the abstract. They are tools, and a board should understand each well enough to choose. When they are chosen well, they work. In May 2026, the Court of Chancery dismissed every claim against the KnowBe4 board over Vista’s $4.6 billion take-private, a deal with director-level conflicts, a sponsor rollover and a banker whose independence was challenged, because the committee had real authority and the unaffiliated stockholders had voted with full information.
The court did not require perfection. It required a process the board could explain.
The mark of a well-run process is that the lead director can explain every structural choice in her own words, and the record reads like the board’s judgment rather than a law firm’s boilerplate or Al-generated slop.
This Year, Structure Will Do More Work Than Price
Price alone is closing fewer deals this fall. Buyers and sellers cannot agree on next year’s revenue once customers start deploying Al agents. The gap between a bidder’s number and a board’s number is about the future, not today. Deals are bridging it with structure: contingent consideration tied to retention; rollover for founders and long-only holders who want to stay; staged payments against milestones; and stock consideration from a strategic buyer whose own multiple does some of the work. That is where a general counsel and experienced deal lawyer earn their keep. The documents carrying that structure are where later disputes begin, and drafting them to avoid those disputes is a craft.
A Closing Thought
None of this needs to be formalized, and much of it should not be. The companies that handle an approach well are usually the ones where the chief executive and the lead independent director already talk often enough that the subject would not feel strange, where the general counsel has a quiet sense of who on the board knows whom, and where there is a banker or a lawyer somewhere in the CEO’s phone. Those are habits rather than preparations, and most experienced management teams have them without thinking about it. If the board’s plan is current and the assumptions behind it are understood, so much the better, because that is what any later valuation work will rest on.
The value of thinking about it now is not that it commits anyone to anything. It is that when the call comes, from whatever direction, the company can decide on its own terms, and at its own pace, whether it wants to have the conversation at all. In a market like this one, that is most of the game.
— Louis Lehot