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Shareholder lawsuits over big M&A deals drop

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The percentage of merger & acquisition deals valued over $100 million that have been challenged by shareholder litigation dropped below 90% in 2015 and in 2016’s first half for the first time since 2009, says a study.

The report by Boston-based Cornerstone Research found that 64% of M&A deals faced litigation in the first six months of 2016, while 84% were challenged in 2015.

There were 47 M&A deals with associated lawsuits during the first half of this year, while 174 M&A deals had associated lawsuits in 2015, according to the report.

The report says these lawsuits usually take the form of a class action, with plaintiff attorneys typically alleging the target’s board of directors had violated its fiduciary duties by conducting a flawed sales process that did not maximize shareholder value.

The study also discussed the January 2016 ruling by the Delaware Court of Chancery in In re Trulia Inc. which ruled against “disclosure-only” settlements in M&A deals.

“While disclosure-only settlements are less likely to be approved by the Delaware Court of Chancery, it remains to be seen whether

other venues will continue to grant them,” says the report, “Shareholder Litigation Involving Acquisitions of Public companies, Review of 2015 and 1H 2016 M&A Litigation.”

“Early anecdotal evidence indicates that it is possible that they will. This has led to cases being litigated with increasing frequency outside Delaware,” says the report.