PHLT

How might the investigation by the former Louisiana Attorney General affect the likelihood of the sale closing?

Created August 06, 2025 at 07:33 PM

Impact of the investigation on the probability that the sale will close

Potential effect	How it works	Likelihood of influencing the closing
Increased legal and regulatory scrutiny	The former Louisiana Attorney General, Charles C. Foti Jr., together with the law firm Kahn Swick & Foti (KSF), is reviewing whether the cash‑consideration of $7.75 per share and the way the deal was put together are “adequate.” If KSF uncovers material deficiencies—e.g., the price is deemed unfair to shareholders, the board did not obtain proper independent advice, or the process violated state corporate‑governance rules—then the parties may be forced to halt the transaction while the issues are remedied.	High – Any finding of inadequacy can trigger a formal inquiry, a cease‑and‑desist order, or a requirement for a revised shareholder vote, all of which can delay or derail the closing.
Shareholder pressure and possible dissent	The investigation is likely to be public (business‑wire release) and will raise questions among Performant’s investors about whether they are receiving “fair value.” Dissatisfied shareholders may file derivative suits, demand a re‑vote on the merger, or refuse to tender their shares. A high level of dissent can make it impossible for the acquirer (Machinify) to reach the required share‑holder approval thresholds.	Medium‑High – If a sizable block of shareholders objects, the acquirer may have to renegotiate the price or amend the deal terms, which can push the closing further out or cause the parties to walk away.
Potential for a re‑negotiated price or deal structure	KSF’s “adequacy” review could reveal that the $7.75 cash offer undervalues the company relative to its recent trading range, earnings, or comparable transactions. Machinify might be asked (or compelled) to increase the cash consideration or add other sweeteners (e.g., contingent‑value rights, earn‑out components). Negotiating new terms takes time and can create a “price‑gap” that stalls the transaction.	Medium – A higher price may be acceptable to shareholders, but it also reduces Machinify’s upside and could lead to a stalemate if the parties cannot agree on a revised structure.
Delay in required corporate approvals	The merger will still need approval from Performant’s board, its independent committee (if any), and possibly the New York State Department of Financial Services (given the NY domicile). An external adequacy probe often forces the board to conduct a more thorough independent review, which can extend the timeline for board sign‑off and for filing the final Form 8‑K/8‑A with the SEC.	Low‑Medium – While procedural delays are common, they rarely stop a deal outright unless the investigation uncause a substantive legal finding.
Reputational risk for Machinify	Machinify’s involvement in a transaction that is being questioned by a former state attorney‑general can raise public‑relations concerns. If the market perceives the deal as “questionable,” the acquirer may face pressure from its own shareholders or from regulators in other jurisdictions (e.g., the SEC, FTC) to ensure the transaction is not “unfairly” obtained.	Low‑Medium – Reputation alone rarely halts a deal, but it can add pressure for a more transparent, higher‑valued offer.
Possible litigation or enforcement actions	If KSF determines that the transaction violates Louisiana corporate‑law statutes (e.g., unfair‑value provisions, inadequate disclosure) or securities‑fraud rules, the former AG could file a civil enforcement action or refer the matter to the Louisiana Attorney General’s Office for a formal investigation. Such actions can result in court injunctions that block the merger until the case is resolved.	Low‑High – The probability of a court injunction depends on the strength of any alleged violations; however, the mere filing of a suit can stall the closing for months.

Overall assessment

Probability of a delay: High. The investigation introduces a new, independent review layer that the parties must satisfy before they can finalize the merger. Even if no legal violation is ultimately found, the process of responding to the probe (providing documentation, holding additional board meetings, possibly re‑valuing the offer) will extend the timeline.
Probability of a renegotiation: Medium‑High. If KSF’s review uncovers that the $7.75 cash price is materially below fair market value, shareholders and the board may demand a higher price or additional consideration, forcing Machinify to come back to the negotiating table.
Probability of a deal‑break: Low‑Medium under normal circumstances, but it can rise to Medium‑High if:
- The investigation finds a clear breach of state corporate‑law or securities‑law.
- A significant shareholder group refuses to approve the merger.
- An injunction is sought and granted by a court.

Bottom‑line answer

The investigation by the former Louisiana Attorney General, conducted through Kahn Swick & Foti, is likely to slow the closing of the sale and could prompt a higher price or additional deal terms. While it does not automatically make the transaction impossible, the added legal scrutiny raises the chance of delays, shareholder dissent, and possible renegotiation—all of which reduce the certainty that the sale will close on the originally announced schedule. The ultimate effect will depend on whether KSF’s review uncovers substantive inadequacies that trigger regulatory or litigation actions.

How might the investigation by the former Louisiana Attorney General affect the likelihood of the sale closing?

Overall assessment

Bottom‑line answer

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