“Almost every acquisition of a large U.S. public company announced in 2010 or 2011 elicited multiple lawsuits,” says a new report, Recent Developments in Shareholder Litigation Involving Mergers and Acquisitions—March 2012 Update. “Only a small fraction of these lawsuits, however, resulted in payments to shareholders,” adds the report summary; “the majority settled for additional disclosures or, less frequently, changes in merger terms, such as deal protection provisions.” Highlights of the 2012 M&A litigation update:
- In 2007, just about half (53%) of the deals valued at over $500 million attracted litigation; by 2011, almost all deals of that size (96%) spun off shareholder lawsuits.
- During that same time, the absolute count of lawsuits involving deals of less than $500 million also nearly doubled, with 289 cases filed in 2007 and 502 filed in 2011. The number of cases more than doubled, from 2.8 suits per deal in 2007 to 6.8 in 2011.
- Smaller deals weren’t immune; from 2007 to 2011, 15 deals worth over $100 million drew 15 shareholder filings or more. Notably, 12 of these deals were announced in 2010-2011.
- Certain industries seem to attract more lawsuits—in particular energy (8.6 per deal) and consumer goods (6.0 per deal).
A flight from Delaware? Delaware courts continue to claim a greater share of the litigation, with case filings climbing from 34% of all shareholder suits in 2007 to 45% in 2011. At the same time, “the most striking trend in venue choice,” the study says, is that while shareholders are challenging the same deal in Delaware, they are increasingly likely to file a suit based on the same facts and claims in California, New York, and Texas, “likely reflecting where many deal targets are headquartered.”