Shareholders Challenge 96 Percent of Large U.S. Mergers
MENLO PARK, Calif. -- February 28, 2013
Plaintiff law firms continued to challenge nearly all large U.S. merger and
acquisition deals in 2012. These plaintiff law firms filed lawsuits on behalf
of shareholders in 96 percent of M&A deals valued over $500 million and 93
percent of transactions valued over $100 million, according to Shareholder
Litigation Involving Mergers and Acquisitions by Olga Koumrian, a principal of
Cornerstone Research, and Professor Robert Daines of the Stanford Law School.
In addition, deals valued at over $500 million averaged more than 5 lawsuits
“It is not plausible to think that 96 percent of target boards did a bad job
selling the firm. Plaintiffs must be filing on cases where there is no
underlying problem,” said Professor Daines. “The question is whether we can
tell the good cases from the bad ones and whether the threat of a lawsuit
produces any benefits for shareholders.”
SHAREHOLDER M&A LITIGATION
M&A DEALS VALUED OVER $500 MILLION
2007 2008 2009 2010 2011 2012
Number of lawsuits 297 201 257 558 504 429
Percentage of deals 53% 72% 92% 95% 96% 96%
Average number of 2.9 4.2 5.2 5.4 6.1 5.4
lawsuits per deal
© 2013 Cornerstone Research. All rights reserved.
Plaintiff law firms often announced their investigations within hours of the
merger announcement and filed lawsuits an average of 14 days after the
announcement. Most (more than 60 percent) of these cases settled. The average
time between lawsuit filing and settlement was 42 days. In more than 80
percent of settlements the only relief to shareholders was additional
disclosures. In settlements related to the 2012 deals, the average agreed-upon
plaintiff attorney fee was $725,000. In disclosure-only settlements, the
average requested fees declined for the third consecutive year to $540,000.
The report’s authors found that several factors had influenced the amount of
plaintiff attorney fees awarded by the Delaware Court of Chancery: the size of
the settlement fund, other monetary benefits to shareholders, the number of
suits filed, the time to settlement, and the overall deal value.
Two of the largest M&A settlements of the last decade were reached during
2012: $110 million in the El Paso Corp./Kinder Morgan Inc. deal and $49
million in the acquisition of Delphi Financial Group, Inc. by Tokio Marine
Holdings, Inc. Both of these settlements involved allegations of significant
conflicts of interest—a typical allegation in most of the lawsuits that
resulted in large settlements.
In a new category of lawsuits modeled after M&A litigation, plaintiff
attorneys challenged the compensation disclosures included in annual proxy
statements. In these cases, they asked judges to halt upcoming shareholder
votes unless additional disclosures were made by the companies involved in the
transactions. At least 25 of these lawsuits were filed last year, and in the
last 2 months of 2012 plaintiff law firms announced investigations of 33 more
The full text of the report is available from Cornerstone Research.
About Cornerstone Research
For more than 25 years, Cornerstone Research staff have provided economic and
financial analysis in all phases of commercial litigation and regulatory
We work with a broad network of testifying experts, including faculty and
industry practitioners, in a distinctive collaboration. Our staff consultants
contribute expertise in economics, finance, accounting, and marketing, as well
as business acumen, familiarity with the litigation process, and a commitment
to produce outstanding results. The experts with whom we work bring the
specialized expertise of researchers or practitioners required to meet the
demands of each assignment.
Cornerstone Research has more than 450 staff and offices in Boston, Chicago,
Los Angeles, Menlo Park, New York, San Francisco, and Washington.
Hellerman Baretz Communications
Jason Milch, 312-379-9406
Olga Koumrian, 650-470-7053
Press spacebar to pause and continue. Press esc to stop.