Percentage of M&A deals challenged by shareholders of public target companies remained high
in 2014, but other indicators suggest a slowdown
A new report shows that the percentage of 2014 lawsuits filed by shareholders in M&A deals remained consistent with the previous four years, while other key indicators suggest a slowdown. The report, Shareholder Litigation Involving Acquisitions of Public Companies, released on Feb. 25 by Cornerstone Research, reveals that investors contested 93 percent of M&A transactions in 2014. Despite this typically high percentage, shareholders brought a smaller number of competing lawsuits per deal and in fewer jurisdictions, challenged fewer deals valued below $1 billion, and took slightly longer to file lawsuits.
In a significant shift from recent years, 60 percent of contested M&A deals had lawsuits filed against them in only one jurisdiction. Just 4 percent of these deals were challenged in more than two courts, the lowest number since 2007.
“This decline in the number of courts is likely the result of the widespread adoption of corporate bylaws that specify exclusive jurisdiction,” said Adel Turki, a senior vice president of Cornerstone Research and head of the firm’s finance practice. “For acquisitions involving Delaware-incorporated companies, the Delaware Chancery Court has gained ground as a preferred filing destination.”