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Elon Musk should focus on finding a good lawyer as well as tens of billions to fund his mooted management buyout of Tesla. Releasing cryptic terms via Twitter — $420 per share or the chance to stay invested — is unusual to say the least.

Legal risks proliferate whenever a boss who is a large shareholder is on the other side of deal with public investors. Doubts over the seriousness of Mr Musk’s intentions are just the start of these. Forget the challenges of making electric cars. Even the most fastidious chief executive officer will have problems getting a management buyout done.

CEOs wear many hats in a buyout: executive, board member, large shareholder and bidder. They have their own pecuniary interests but also owe duties to ordinary shareholders. They have inside information about the company’s prospects. It would be hard to avoid using it in pursuing a bid.

For all these reasons, management buyouts are reviewed much more strictly by US corporate law courts than other deals. The buyer often has to demonstrate to a Delaware judge that both the price paid and process were “fair”.

Mr Musk has recent experience in this morass. Tesla was sued over its buyout of SolarCity, the clean energy company he founded. In a recent ruling, a Delaware court decided that an affirmative vote of unaffiliated Tesla shareholders approving the SolarCity deal was not enough to save Mr Musk from full assessment against fairness standards.

Over the past few years, management buyouts have been pitfalls for the unwary. The CEO of Dole Food was ordered to pay $148m after he was found to have cheated investors in a 2013 MBO. The Delaware Supreme Court this year refused to dismiss a lawsuit involving the 2017 buyout of a grocery chain, The Fresh Market, where shareholders asserted a founding family tilted the auction in its own favour.

Fortunately, Mr Musk has a good role model: Michael Dell. The PC billionaire took his business private for $26bn in 2014m, weathering intense legal scrutiny. He ran an exemplary process. He told the board his intentions at an early stage. Independent committees were established. Bankers and lawyers represented the interests of all involved. If the volatile Mr Musk has one thing to learn from Mr Dell, it is self-discipline.

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