When a company goes private, it's a sure bet that shareholders will speed-dial their attorneys and file lawsuits to get a higher price. However, the $115 million buyout of Netsmart Technologies (NASDAQ:NTST) offered a twist to this scenario. Leo E. Strine Jr., vice chancellor in Delaware's Court of Chancery, wrote a 77-page ruling on the transaction, highlighting some of the investor dangers of the buyout boom.

Netsmart was ideal buyout bait. Only one analyst covered the thinly traded stock, and its compliance expenses exceeded $1 million per year. It also had little room to grow in its behavioral software niche.

These factors were all part of the standard PowerPoint pitch from Netsmart's financial advisor, William Blair & Co. But one standout slide was labeled "a second bite at the apple." In a typical buyout, this strategy lets the management team retain their jobs, get a slug of stock options, and perhaps even invest in the deal. Assuming the company is eventually sold at a higher price or goes public again, those executives might enjoy a windfall.

With this approach in mind, Netsmart's management decided to pursue a buyout -- without reaching out to any strategic parties. It had no shortage of potential suitors, including the medical branch of GE (NYSE:GE), EDS (NYSE:EDS), Siemens AG (NYSE:SI), and Perot Systems (NYSE:PER). But executives may have feared that selling out to one of those firms might cost them their coveted jobs -- and that second bite of the apple.

Even Netsmart's attempts to contact private equity buyers were tepid. Of the seven on its list, only four presented bids.

After a five-month auction, Insight Venture Partners and Bessemer Venture Partners agreed to buy the company for about two times revenues -- an ordinary valuation for a small enterprise software company.

In light of the facts, Strine thought that Netsmart was "unreasonable" in not reaching out to strategic parties, thereby breaching its duties to shareholders. He also thought the company should have disclosed its cash flow projections in its proxy statement. As a result, Netsmart's shareholder vote has been delayed until management makes changes to the proxy.

I think Strine's ruling is a positive decision for Foolish investors. Amid the recent surge in private equity, management teams may be tempted to sell their companies relatively cheaply, perhaps in exchange for a piece of the action. It's a tough conflict of interest to solve, but at least the Delaware court is insisting that management teams remember that shareholders deserve to get the best price.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is ranked 1,590 out of 24,619 in Motley Fool CAPS.