In March 2012, a study conducted by Cornerstone Research and Professor Robert Daines of the Stanford Law School examined acquisitions of U.S. public companies valued over $100 million and announced in 2010 or 2011. The study found that almost every acquisition of that size elicited multiple lawsuits challenging the terms of the acquisition. Notably, very few of these lawsuits resulted in payments to shareholders, but instead settled based on the inclusion of additional disclosures or occasionally based on changes in other terms of the acquisition agreement.
Today in The Deal, David Marcus offers a detailed look at the now-ubiquitous M&A shareholder lawsuit, and how the shareholder litigators who bring (and defend) these cases have "bellied their way up to the M&A table, where all parties involved in a transaction -- financial and legal advisers, accountants and public-relations firms, writers of fairness opinions, experts in due diligence and post-merger integration -- gather to divide up the fees. It's unlikely they'll be persuaded to leave anytime soon."
What explains the proliferation of M&A cases? According to The Deal, defense lawyers blame the plaintiffs' lawyers for filing lawsuits on every deal. Plaintiffs' lawyers counter that defendants actually encourage such filings by settling even dubious claims. Some observers believe that the combination of statutes such as the Private Securities Litigation Reform Act of 1995 and the Securities Litigation Uniform Standards Act of 1998 have made federal securities litigation more difficult, and led plaintiffs' lawyers to pursue more cases in the M&A area.
One thing that 195 companies companies had done as of the end of 2011 was to amend their bylaws to require that shareholders must bring all litigation in the courts of the state of incorporation. This is intended to limit the number of forums in which the companies can be sued. At least one court, however, recently refused to enforce bylaws amended in this way by Oracle Corp., The Deal reports.
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