Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.

Director duties when sale or break-up of the company becomes inevitable.

Revlon faced a hostile acquisition effort by Pantry Pride. Its board adopted defensive measures and later favored a competing transaction with Forstmann Little, including deal protections that limited further bidding and favored one buyer over another.

The court held that once Revlon was effectively for sale, directors had to focus on obtaining the best value reasonably available for stockholders.

The court reasoned that once the break-up or sale of control became inevitable, the board's role changed from defending the corporate enterprise to obtaining the best price for shareholders. Defensive measures that ended an active auction or favored one bidder without adequate shareholder-value justification failed that duty.

1. Which corporate actor gains authority or bears monitoring responsibility under the rule?
2. How does the rule affect agency costs without unduly impairing informed business judgment?