Delaware is the legal home of a huge share of corporate America, and its Chancery Court is where the biggest corporate fights play out. In March 2025, the state changed its rules to make it harder to sue company executives and directors over insider deals. Elon Musk's decision to move Tesla's legal home to Texas was one reason behind the change, since Delaware wanted to hang on to its status.
What the law did not do is give bankers the same protection. Financial advisers stayed open to lawsuits, and shareholders have taken notice. Since the shift, banks have been named as defendants in at least five cases, with four of those coming from the firm Block & Leviton, according to a Bloomberg review of court records.
The claim tends to follow an arc: an adviser helped take a public company private for a private-equity client at a price below what the company was really worth, and the adviser knew this helped directors violate the duties they owe shareholders. The adviser may not have made the decision, but it was in the middle of the process that produced it, so the bank ended up as a target. The new statute was meant to keep companies from leaving Delaware, but by shielding only directors and officers, it left advisers exposed.
Early verdicts go in different ways. In February, Judge Travis Laster refused to drop Goldman Sachs from a case over Vista Equity Partners' $4 billion take-private of EngageSmart, a transaction that also produced a $500 million payout for General Atlantic. Laster concluded that the adviser's central role in the sale meant it could not avoid scrutiny when a deal went wrong.
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In July, another judge dismissed a Morgan Stanley suit over the purchase of Envestnet by Bain Capital, saying the complaint did not show that Morgan Stanley had acted without board direction or had withheld information from the board. That gives banks a narrow but real amount of room to argue that they were not the ones who owed fiduciary duties to shareholders.
JPMorgan is using a similar argument in a suit over the sale of Snap One to Hellman & Friedman. The bank said the deal "bore all the hallmarks of a legitimate and well-executed sale process." Morgan Stanley, meanwhile, faces another pending case.
A buyout is the moment when your stock stops being a stock. When a company is taken private, shareholders get paid a price per share, and that is it. If that price is too low, the difference between fair value and the offer price quietly moves from your pocket.
That is why the pressure on advisers matters. The banks know the market, they see the offers, and they can poke holes in them.
When the banker is afraid to get dragged into court, that matters. For someone who owns shares in a company, an adviser that is careful about conflicts and price may lead to a fairer price on the way out.
The Delaware law change did not end the risk in buyouts. It just put the risk on new shoulders, and those shoulders are in the courtroom.
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