Merger, acquisition lawsuits increase: Report

Lawsuits filed for acquisitions of U.S. companies valued at or over $500 million increased twofold, Cornerstone Research said Thursday in a new report.

The number of M&A lawsuits valued at over $500 million for deals announced in 2008 and 2009 were 201 and 250, respectively. In 2007, 289 lawsuits were filed. That compares with 557 and 502 lawsuits of M&A deals valued at or over $500 million in 2010 and 2011, respectively, the Boston-based financial research and analysis firm said in the report.

“Because M&A activity declined in 2010 and 2011 compared with 2007, the increase in the number of lawsuits translates into a much higher incidence of lawsuits for 2010 and 2011 deals,” Cornerstone said in the report. While half of such acquisitions announced in 2007 were challenged, “almost every such acquisition in 2010 and 2011 was the target of litigation, and each challenged deal attracted many more lawsuits.”

Of acquisition deals valued at or over $100 million dollars, 789 lawsuits were filed in 2010 and 740 in 2011. As of March, 67 lawsuits were reported for 13 out of 17 deals announced in January and February of this year, Cornerstone said, noting that almost every acquisition over $100 million in value was a target of shareholder litigation.

The energy industry attracted the most lawsuits per deal during 2010-2011 with an average of 8.6 lawsuits per deal. The consumer goods and industrial industries ranked second and third at 6 and 5.1 average number of lawsuits per deal, respectively.

Among others, the financial services industry attracted the least number of lawsuits, according to the report.