A strategic buyer sits across the table from a target company’s special committee. The target’s CEO — who is also the holder of a substantial slug of preferred stock with liquidation-preference economics that the common stockholders do not share — has been working the buyer’s deal team for six months. By the time the special committee is formed, the price band, the structure, and the financial advisor’s range of opinion have all been pre-negotiated through the CEO. The committee inherits a process. The buyer’s deal team knows this. The deposition record is going to show that the buyer’s deal team knew it from the first meeting. That posture is the new face of buyer aiding and abetting liability Delaware deal counsel has to plan around in 2026.
Two years ago, after the Delaware Supreme Court’s decisions in Mindbody (2024) and Columbia Pipeline (2025), the buyer’s M&A counsel would have told the buyer that aiding-and-abetting exposure on these facts was close to theoretical. The standard had been narrowed to actual knowledge that the buyer’s own conduct was wrongful, and arm’s-length bargaining was reaffirmed as the “formidable obstacle” to plaintiffs. The doctrine looked closed.
Then on March 31, 2026, Vice Chancellor Laster’s Court of Chancery decision in YWCA of Rochester and Monroe County v. Hatteras Funds, C.A. No. 2024-1264-JTL, declined to dismiss aiding-and-abetting claims against a third-party buyer, and reminded the deal bar that a buyer who helps create the condition giving rise to a sell-side conflict still owns the consequences of that conflict.
Why Mindbody and Columbia Pipeline were not the end of the story
For practitioners reading the Delaware Supreme Court’s 2024 and 2025 pair as a doctrinal closure of buyer-side aiding-and-abetting, YWCA v. Hatteras is the case that should reset that read. The two earlier decisions tightened the proof a plaintiff has to put up — actual knowledge of the breach and of the impropriety of the buyer’s own conduct, not constructive knowledge. They did not eliminate the doctrine. They drew the boundary in a way that left a specific kind of buyer conduct — the buyer that participates in the creation of the conflict, not just exploits one that exists — squarely inside the perimeter.
The Hatteras court’s framing was that even after the “stringent” standards articulated by the Supreme Court in the recent cases, a third-party buyer may face aiding-and-abetting liability if it “create[ed] the condition giving rise to a [sell-side] conflict of interest.” That language is doing real work. It draws the doctrinal line not at whether the buyer knew about the sell-side breach — that was the Mindbody/Columbia question — but at whether the buyer participated in the architecture of the conflict before the sell-side fiduciaries ever sat down to consider the transaction. A buyer who, on the deposition record, was working with a conflicted sell-side fiduciary to design the deal structure that the rest of the board would later be asked to bless is a buyer who helped create the condition. The complaint survives.
The facts in Hatteras involved a roughly $305 million sale of master-fund assets in a structure that, the plaintiff alleged, had been pre-arranged between the fund’s investment manager and the buyer in a way that allocated value to insiders and away from the feeder-fund investors. The aiding-and-abetting claim against the buyer survived because the buyer was a participant in the architecture, not just a counterparty to the trade. The procedural posture — a Rule 23.1 demand-futility analysis layered on top of a 12(b)(6) review — gave the court room to articulate the standard against a developed factual narrative. The published opinion is at courts.delaware.gov for the deal bar to read in full.
What “creating the condition” looks like in a public-company strategic deal
The Hatteras framework matters most for transactions that do not look anything like Hatteras. The fund structure in the case is a niche fact pattern. The doctrinal line the case draws applies straight across to ordinary public-company strategic deals, controlled-company take-privates, and management-led recapitalizations.
Three patterns now carry materially more litigation exposure than the post-Mindbody consensus would have suggested.
The first is the management-walk-around. A buyer that does not have a formal mandate to deal directly with management often does so anyway, especially in industries where the buyer is also a customer, partner, or prior acquirer. The buyer’s deal team has a relationship with the target’s CEO from a commercial context. The structure of a potential transaction gets discussed informally over the months leading up to a formal process. By the time the special committee is convened, the deal economics have been functionally pre-decided. The committee’s process becomes a ratification exercise. After Hatteras, a buyer in this posture has participated in the creation of the condition that the committee is asked to bless. The deposition record — texts, deal-team memos, scheduling artifacts — will tell that story.
The second is the side-arrangement with a conflicted sell-side fiduciary. The CEO who is rolling over equity into the buyer; the controlling stockholder who is signing a voting-and-support agreement; the chairman who is negotiating a post-closing consulting arrangement. The conflicted fiduciary’s incentive is to push the deal through with the sell-side process the buyer prefers. The buyer’s incentive is to maintain the relationship that produced the deal. Mindbody and Columbia Pipeline held that mere knowledge of the conflict is not enough; Hatteras says that participating in the side arrangement that produces the conflict is a different posture and a more dangerous one. The drafting implication is that the buyer’s deal team needs to be measurably arm’s-length from any sell-side fiduciary whose conflict the special committee will later need to manage. The interaction with the MFW ab initio timing rule under SB 21 is part of the same record.
The third is the staged-pressure structure. A buyer that creates a sale process by leveraging a contractual right — the exercise of a put, the breach of a covenant, the threat to terminate a commercial agreement — can, depending on the facts, be characterized as a buyer that created the conflict it later exploited. The doctrinal hook is whether the buyer’s conduct preceded and produced the situation the sell-side fiduciaries had to react to. If it did, the buyer is closer to the Hatteras line than to the arm’s-length-bargaining safe harbor that Columbia Pipeline reaffirmed.
The drafting and process moves that follow for buyer aiding and abetting risk
The Hatteras decision changes how buy-side counsel should structure the negotiation of a strategic deal in 2026, in three concrete and underused ways.
The first is the diligence on the sell-side process before signing. Buy-side counsel has traditionally treated the sell-side process as the sell-side’s problem — the buyer’s concern is the disclosure schedule, the reps, and the deal terms. After Hatteras, the integrity of the sell-side process is also the buyer’s concern. The questions to ask, on the record and in writing, are whether a special committee was formed, when it was formed relative to the buyer’s first contact, whether the committee retained independent counsel and an independent financial advisor before substantive negotiations began, and whether the committee has been the actual counterparty rather than a backstop ratifying a CEO-led negotiation. A short “process letter” from buy-side counsel asking these questions, sent at the beginning of the formal process, creates a paper record that supports the buyer’s good-faith position later. The buy-side’s overall M&A transactional posture needs to absorb it.
The second is the segregation of management communications. From the moment a transaction is contemplated, the buyer’s deal team should treat communications with the target’s management as if they will be produced. Side channels — personal email, encrypted messaging, oral discussions without a deal-team representative present — are the discovery exposure. Buy-side counsel should impose a written protocol at the outset that all substantive deal communications run through the special committee’s counsel once the committee is formed, and that pre-committee communications with management are documented and limited to commercial topics that do not preview deal terms. This protocol is not glamorous. It is also the single most effective drafting move to keep the buyer out of the Hatteras zone.
The third is the contractual representation about process integrity. Sophisticated buyers have started asking for a target representation that the board’s process complied with applicable fiduciary standards and that no side arrangements with management or controlling stockholders exist that have not been disclosed to the buyer. The representation is not a shield from aiding-and-abetting liability — the buyer’s knowledge of a side arrangement is the issue, not the seller’s representation. But the representation surfaces the issue for the seller’s diligence and creates a record that buy-side counsel asked the question. In a litigation posture two years out, that record matters. The interaction between this representation and the broader allocation of deal terms, including the no-shop and fiduciary-out architecture, is one of the underdeveloped 2026 negotiation points.
The post-Hatteras sell-side checklist
The mirror-image analysis for sell-side counsel is just as concrete. The sell-side process needs to be defensible not only against breach-of-fiduciary-duty claims against the directors, but also against aiding-and-abetting claims against the buyer that, after Hatteras, may now survive a motion to dismiss on facts that would have been dismissed under the older reading.
The special committee, if one is required, needs to be formed early, retain its own counsel and financial advisor early, and conduct negotiations through that channel. The committee’s minutes should reflect the committee’s awareness of management’s conflicts and the committee’s affirmative effort to negotiate independently of management. The committee should ask buy-side counsel, on the record, what communications the buyer has had with management before the committee was formed and what the substance of those communications was. The CEO-led negotiation that the committee inherits and ratifies is the worst posture and the one most likely to produce a complaint that survives both against the board and against the buyer.
The disclosure schedule should affirmatively list management’s pre-signing arrangements with the buyer — rollover terms, employment terms, consulting terms, equity terms — not because the buyer does not already know them, but because the affirmative disclosure documents the special committee’s awareness and removes the inference that the arrangements were hidden. The 14A or the merger proxy will say much the same thing later. Putting the disclosure in the agreement, and not just the proxy, is a cheap and effective record-builder. For Delaware-incorporated targets, the question of how the controlling stockholder’s involvement was managed throughout the process — including under the doctrinal shift after Moelis and the stockholder-agreement reversals that have reshaped the controller-deal landscape — should be answered in the record at signing, not at the deposition.
The doctrinal direction
The lesson from Hatteras is not that the Delaware Supreme Court’s 2024 and 2025 cases were wrong, or that the standard has reverted. The lesson is that the standard does what it says and not more. Mindbody and Columbia Pipeline drew a tight perimeter around what counts as actionable buyer conduct. The Court of Chancery in Hatteras applied that perimeter and held that it still includes the buyer that helped create the conflict, even if it would not include the buyer that merely benefited from one.
For the deal bar in 2026, that posture is the working assumption. Buy-side counsel should be structuring negotiations and managing communications on the premise that Hatteras is the operative case. Sell-side counsel should be structuring the process and the record on the same premise. The next year of opinions will refine the boundary, and there will be cases that look like Mindbody-side facts on which the buyer wins at the motion to dismiss. There will also be cases that look like Hatteras-side facts on which the buyer does not, and the cost of getting through discovery on those facts is itself the price of the doctrine.
If you are a strategic buyer running diligence on a potential target where a controller, special committee, or financial advisor situation is at all unusual — or a board approaching a deal where the buyer’s pre-signing conduct may color the record, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
