Cornerstone Research Report: Legal Challenges to M&A Deals Dip below 90 Percent for First Time Since 2009

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Filings in Delaware Court of Chancery also decrease in last three quarters

For the first time since 2009, the percentage of M&A deals valued over $100 million and challenged by shareholder litigation dropped below 90 percent in 2015 and so far in 2016, according to a new report released today by Cornerstone Research. The report, Shareholder Litigation Involving Acquisitions of Public Companies—Review of 2015 and 1H 2016 M&A Litigation, found that 64 percent of M&A deals faced litigation in the first six months of 2016. There were 47 M&A deals with associated lawsuits during the first half of the year.

Over the first three quarters of 2015, plaintiffs challenged mergers and acquisitions in the Delaware Court of Chancery 61 percent of the time. In the fourth quarter of 2015 and the first two quarters of 2016 combined, M&A-related litigation was filed in Delaware for only 26 percent of challenged deals.

“While disclosure-only settlements are less likely to be approved by the Delaware Court of Chancery since the Trulia decision, it remains to be seen whether other venues will continue to grant them,” said Ravi Sinha, a principal of Cornerstone Research. “Early anecdotal evidence indicates that it is possible that they will. If they do, it is likely that we’ll continue to see cases being litigated with increasing frequency outside Delaware.”

The average number of lawsuits per deal steadily declined, from 4.6 per deal in 2014 to 4.1 in 2015 and 2.9 in the first six months of 2016. In addition, M&A-related lawsuits were filed more slowly in 2015 and the first half of 2016. During that period, the first lawsuit was filed an average of 22 days after the deal announcement, compared with 14 days in 2014.

Key Findings:

  • Plaintiff attorneys filed lawsuits in 84 percent of all M&A deals announced in 2015 and valued over $100 million. A total of 174 M&A deals had associated lawsuits in 2015.
  • Lawsuits were filed in 64 percent of all M&A deals announced in 1H 2016 and valued over $100 million. There were 47 M&A deals with associated lawsuits during the first half of the year.
  • In 2015 and the first half of 2016, the percentage of M&A lawsuits that were resolved before deals closed dropped to 57 percent and 56 percent, respectively, down from 75 percent in 2014.
  • The majority of litigation challenging a deal was filed in only one jurisdiction: 65 percent in 2015, and 57 percent in the first half of 2016. Only 5 percent and 9 percent of deals were challenged in three or more courts in 2015 and the first half of 2016, respectively.
  • There were no deals with more than seven lawsuits filed in the first half of 2016.
  • Monetary consideration paid to shareholders has remained relatively rare—there were only a handful of monetary awards and settlements reached in 2015 and in the first half of 2016.

About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 600 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington. Please visit Cornerstone Research’s website for more information about the firm’s capabilities in economic and financial consulting and expert testimony.

http://www.cornerstone.com
Twitter: @Cornerstone_Res

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