What Are Appraisal Rights? Dissenting From a Merger (2026)

How appraisal rights work

In a cash merger, every public share is converted into the deal consideration once the deal closes, whether or not the holder voted for it. Appraisal is the main exception. A holder who perfects appraisal rights does not receive the merger consideration. The holder instead has a claim against the surviving company for the fair value of the shares, as determined by the Delaware Court of Chancery, plus statutory interest.

The trade is simple to describe. The holder gives up a known price paid at closing for an uncertain price paid years later, with interest, after a trial. The buyer gives up certainty about its total purchase cost.

Appraisal matters most where the price may not reflect value, such as a controller buying out the minority in a going-private transaction or a deal struck without a broad sale process. It is also a factor in deal risk: a large appraisal demand can show up as a closing condition in the merger agreement, since some buyers cap how many shares can dissent.

When appraisal rights are available

Section 262 grants appraisal for shares of a Delaware corporation in a merger or consolidation, subject to an exception commonly called the market-out.

• The market-out. No appraisal is available for shares that were listed on a national securities exchange, or held of record by more than 2,000 holders, at the record date for the vote.
• The carve-back. The market-out does not apply if holders are required to accept anything other than stock of the surviving company, stock of another company that is itself listed or widely held, cash in lieu of fractional shares, or a combination of those. An all-cash deal, or a cash and stock deal, therefore restores the right for listed shares.
• Short-form and two-step mergers. When a parent owning at least 90% merges out the minority under Section 253, or a buyer completes a tender offer and closes a second-step merger under Section 251(h), holders who are cashed out without a vote generally have appraisal rights too.

Other states have their own dissenters' rights statutes, and many follow the Model Business Corporation Act rather than Delaware. Check the target's state of incorporation on the cover of its filings before assuming any of the Delaware rules apply.

The steps and deadlines in Delaware

Appraisal is easy to lose. The steps are technical, and the deadlines are strict.

1. Read the notice. For a merger put to a vote, the company must notify holders at least 20 days before the meeting that appraisal rights are available and include a copy of Section 262. In a merger proxy, the federal proxy rules also require a section on dissenters' rights of appraisal. Our guide on how to read a proxy statement shows where it sits.
2. Deliver a written demand before the vote. The demand must reasonably inform the company of the holder's identity and that the holder intends to demand appraisal. A proxy or a vote against the merger is not a demand. For deals without a vote, such as a Section 251(h) or short-form merger, the demand is generally due within 20 days after the notice is sent.
3. Do not vote in favor. Voting for the merger, or consenting in writing, forfeits the right. Abstaining or voting against keeps it.
4. Hold through closing. The holder must own the shares continuously through the effective date of the merger. Selling in the market before closing ends the claim for those shares.
5. File, or make sure someone files, a petition. Within 120 days after the effective date, the surviving company or any holder who has complied may file a petition in the Court of Chancery. If no petition is filed in time, appraisal rights end for everyone.
6. Decide whether to stay in. Within 60 days after the effective date, a holder who has not started or joined the case can withdraw the demand and take the deal consideration. After that, withdrawal generally needs the company's agreement or the court's approval.

Tracking the merger through approval helps here: the record date, meeting date and expected closing date drive every appraisal deadline.

How the court decides fair value

The court determines the fair value of the shares "exclusive of any element of value arising from the accomplishment or expectation of the merger," taking into account all relevant factors. Two parts of that standard matter in practice.

First, fair value is the value of the company as a going concern on the closing date, not the value a particular buyer expects after combining it with its own business. Those combination gains belong to the buyer. That is why a strategic buyer's price, which often includes a share of expected savings, can exceed fair value.

Second, the court can weigh any reliable evidence: the deal price, the unaffected trading price, a discounted cash flow model, comparable companies and precedent deals. In its 2017 decisions in DFC Global and Dell, the Delaware Supreme Court held that the deal price from an arm's-length, competitive sale process deserves heavy weight. In Aruba Networks in 2019, the same court set fair value at the deal price minus the buyer's expected combination gains, which was below the deal price. Since then, petitioners have had the strongest case where the sale process was weak, such as a controller transaction or a deal with little market check.

Interest, prepayment and costs

Unless the court finds good cause otherwise, interest runs from the effective date to payment at 5% over the Federal Reserve discount rate, compounded quarterly. When short-term rates are low, that rate can exceed what a holder could earn elsewhere, which is one reason specialist funds have bought shares after a deal announcement in order to seek appraisal, a practice known as appraisal arbitrage.

The surviving company can limit that interest. It may pay each petitioner any amount in cash before judgment. Interest then accrues only on the difference between the prepayment and the final award, plus any interest already accrued.

Costs work differently. The court taxes the costs of the proceeding as it finds equitable, and a petitioner's own lawyers and valuation experts are generally paid by the petitioner. The court can charge some of those expenses pro rata against all shares in the appraisal, which spreads the cost among petitioners rather than shifting it to the company.

A worked example

The figures below are illustrative. Company A and Company B are hypothetical, and the interest rate assumes a 4% discount rate held flat, which real rates will not be.

Company B agrees to buy Company A, a Delaware corporation listed on a national exchange, for $40 per share in cash. A holder owns 200,000 shares, worth $8.0 million at the deal price. The holder demands appraisal, does not vote in favor and holds through closing. The case takes two years. Statutory interest is 4% plus 5%, or 9% a year, compounded quarterly, which grows each dollar of fair value by about 19.5% over two years. The holder spends $600,000 on lawyers and experts.

The table leaves out what the holder could have earned on $8.0 million over two years, and the fact that the holder's money was tied up the whole time. A smaller holder carries similar fixed costs on a far smaller claim, which is why appraisal is mostly used by funds with large positions.

Where this goes wrong

• A missed step. A late demand, a vote in favor, a transfer between accounts that breaks continuous ownership or a broker that votes the shares for the merger can forfeit the right. The statute does not forgive near misses.
• An award below the deal price. Courts have set fair value below the merger price, especially after competitive sale processes and with strategic buyers. The holder then receives less than the holders who simply took the deal.
• Prepayment. A surviving company that prepays the deal price removes most of the interest that made the claim attractive, while the holder's costs keep running.
• The de minimis rule. For listed shares, the court dismisses the case unless the shares seeking appraisal exceed 1% of the outstanding shares or their merger value exceeds $1 million, with exceptions for short-form mergers. A small holder may need others to join.
• Time and liquidity. The claim cannot be sold on an exchange. Capital is locked up through discovery, trial and any appeal.
• The wrong state. Applying Delaware rules to a company incorporated elsewhere can mean missing a different deadline or a different market-out.

How investors use appraisal rights in practice

For most holders, the useful question is not whether to dissent but what appraisal means for the deal. In merger arbitrage, a closing condition that limits dissenting shares adds a small risk that the deal fails if holders demand appraisal at scale. In a controller buyout, the threat of appraisal can support a higher price from a special committee. In a tender offer followed by a second-step merger, holders who do not tender should read the appraisal notice before the deadline passes.

Follow-up filings show how many shares demanded appraisal: the merger agreement's conditions, the closing 8-K and the buyer's later 10-Q or 10-K often mention pending appraisal proceedings. Newsletters that cover special situations often flag these cases; our list of special situations newsletters compares them. Dombey's published research notes appraisal conditions and controller dynamics when a deal is covered; see the research archive.

The bottom line

Appraisal rights let a shareholder who rejects a cash-out merger ask a court for fair value instead of the deal price. In Delaware, Section 262 sets the rules: an all-cash deal usually restores the right for listed shares, the written demand must come before the vote, and a petition must be filed within 120 days after closing. The award can be higher or lower than the deal price, and courts give real weight to the deal price after a competitive sale. Statutory interest helps, but costs, delay and prepayment cut into it, so appraisal suits large holders in deals with a weak process far more than it suits most individual investors.