Key Takeaways
- • Delaware Chancellor Kathaleen McCormick dismissed all fiduciary duty and control group claims on May 27, 2026, clearing Vista Equity Partners' $4.6 billion take-private acquisition of cybersecurity firm KnowBe4.
- • The court ruled that KKR and Elephant Partners did not constitute a stockholder control group despite holding 26.4% and 37.5% of voting power respectively, eliminating a key argument by plaintiffs Bill Le Clair and Joseph Pospisil.
- • The decision reinforces the protective value of procedural safeguards in conflicted M&A transactions, including a fully empowered special committee and a majority-of-the-minority stockholder vote that satisfied the Corwin standard.
- • Vista's initial 2.8% stake, acquired in March 2021 for $300 million in preferred shares, ultimately grew into the full platform acquisition at significantly higher valuation.
- • The ruling establishes precedent that informed, uncoerced stockholder votes can cleanse entire fairness scrutiny in take-private transactions even when director-level conflicts exist.
Summary
On May 27, 2026, Chancellor Kathaleen McCormick of the Delaware Court of Chancery issued a memorandum opinion dismissing all claims in Le Clair v. KnowBe4, Inc., granting defendants' motions to dismiss the stockholder challenge to Vista Equity Partners' $4.6 billion take-private of KnowBe4, a Florida-headquartered cybersecurity awareness training solutions provider. The case, docketed as C.A. No. 2024-1143-KSJM, involved former Class A stockholders Bill Le Clair and Joseph Pospisil challenging the acquisition on fiduciary duty and control group grounds.
The decision centered on two critical procedural issues: first, whether KKR and Elephant Partners—holding 26.4% and 37.5% of voting power respectively as of the record date—should be deemed a control group capable of breaching fiduciary duties; and second, whether an informed, uncoerced majority-of-the-minority vote could satisfy the cleansing standard established in Corwin v. KKR Financial Holdings LLC (125 A.3d 304, Del. 2015) to eliminate entire fairness review. Chancellor McCormick resolved both questions in defendants' favor, finding insufficient pleading to establish a control group and determining that the stockholder vote satisfied Corwin's protective requirements.
KnowBe4's capital structure reflected multiple sophisticated institutional investors. Founder and CEO Sjoerd Sjouwerman retained 4.2% voting power as of the record date. Vista's involvement began in March 2021 when it acquired preferred shares from KKR, Elephant, and another institutional investor for $300 million, obtaining 2.8% of KnowBe4's voting power at that time. The subsequent expansion to a full platform acquisition at $4.6 billion represented a substantial value creation event for Vista over the intervening period.
The court's dismissal underscores the practical importance of robust M&A procedural protections in transactions involving director-level conflicts. By establishing a fully empowered special committee with independent directors and conditioning closing on a majority-of-the-minority vote—where only shares held by non-controlling stockholders counted toward approval—KnowBe4's transaction structure provided the procedural safeguards necessary to withstand heightened judicial scrutiny. This framework allowed the court to apply the Corwin standard rather than subjecting the transaction to entire fairness review, a significantly more demanding test that would have required defendants to prove fair dealing and fair price.
The ruling effectively concludes the litigation challenge to the Vista acquisition and provides guidance to practitioners on structuring similar take-private transactions involving institutional investors and potential conflicts.
The decision centered on two critical procedural issues: first, whether KKR and Elephant Partners—holding 26.4% and 37.5% of voting power respectively as of the record date—should be deemed a control group capable of breaching fiduciary duties; and second, whether an informed, uncoerced majority-of-the-minority vote could satisfy the cleansing standard established in Corwin v. KKR Financial Holdings LLC (125 A.3d 304, Del. 2015) to eliminate entire fairness review. Chancellor McCormick resolved both questions in defendants' favor, finding insufficient pleading to establish a control group and determining that the stockholder vote satisfied Corwin's protective requirements.
KnowBe4's capital structure reflected multiple sophisticated institutional investors. Founder and CEO Sjoerd Sjouwerman retained 4.2% voting power as of the record date. Vista's involvement began in March 2021 when it acquired preferred shares from KKR, Elephant, and another institutional investor for $300 million, obtaining 2.8% of KnowBe4's voting power at that time. The subsequent expansion to a full platform acquisition at $4.6 billion represented a substantial value creation event for Vista over the intervening period.
The court's dismissal underscores the practical importance of robust M&A procedural protections in transactions involving director-level conflicts. By establishing a fully empowered special committee with independent directors and conditioning closing on a majority-of-the-minority vote—where only shares held by non-controlling stockholders counted toward approval—KnowBe4's transaction structure provided the procedural safeguards necessary to withstand heightened judicial scrutiny. This framework allowed the court to apply the Corwin standard rather than subjecting the transaction to entire fairness review, a significantly more demanding test that would have required defendants to prove fair dealing and fair price.
The ruling effectively concludes the litigation challenge to the Vista acquisition and provides guidance to practitioners on structuring similar take-private transactions involving institutional investors and potential conflicts.
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