April 20, 2015

Study: Shareholder Litigation Involving Acquisitions of Public Companies

Recently, a new Cornerstone Research report – entitled “Shareholder Litigation Involving Acquisitions of Public Companies” – was released. Perhaps the most significant finding was a significant increase in the percentage of transactions challenged in only one jurisdiction. The report attributed this shift away from multi-forum litigation to the increasingly widespread adoption of exclusive venue bylaws. According to the report, more than 300 companies adopted such provisions in 2013 and 2014. Other key trends include:

– Plaintiff attorneys filed more than 600 lawsuits challenging M&A deals announced in 2014 and valued over $100 million.

– The percentage of deals challenged in litigation remained high at 96% for deals valued over $1 billion, but declined for deals valued under $1 billion, from 94% in 2013 to 89% in 2014.

– The average number of lawsuits per deal declined from 5.2 in 2013 to 4.5 in 2014, the lowest annual rate since 2009.

– The number of deals with more than 10 filings decreased, from 14 in 2013 to nine in 2014.

– The percentage of lawsuits resolved before M&A deals closed in 2014 slid to the lowest level since 2008. In 2014, only 59% of litigation was resolved before the deals were concluded, compared with 74% in 2013.

– Only one M&A case in the data went to trial in 2014; it resulted in a $76 million damages award.

– Lawsuits challenging M&A deals were filed more slowly in 2014. The first lawsuit was filed an average of 14 days after the deal announcement, compared with 11 days in both 2012 and 2013.

– Similar to prior years, almost 80% of settlements reached in 2014 provided only additional disclosures. Just six settlements involved payments to shareholders.