Shareholder Lawsuits After M&A: The Cornerstone Study

Last year the overwhelming majority – 93 percent – of M&A deals valued at more than $100 million were followed by shareholder lawsuits. For the biggest deals, those valued at more than $1 billion, the percentage was even higher, at 96 percent. Overall, however, the average number of lawsuits per deal declined, from 5.2 in 2013 to 4.5 in 2014. A complete breakdown and commentary that looks at filings, outcomes and settlement terms in 2014 and plots trends going back to 2007 can be found in the recently released study Shareholder Litigation Involving Acquisitions of Public Companies, from Cornerstone Research. The major issue in these lawsuits, the report says, is typically a claim that the board violated its fiduciary duties with a  flawed sales process that failed to maximize shareholder value. Allegations could include failure to solicit competitive bids, conflicts of interest involving executive retention or post-merger payments to executives, or failure to disclose sufficient information about the sale process and financial adviser valuations.