Shareholders litigated 82% of $100M-plus deals: Cornerstone

Shareholders litigated 82% of merger & acquisition deals valued over $100 million in both 2017 and 2018, says a report issued Tuesday.

The report indicates the impact of the January 2016 Delaware Court of Chancery’s decision in In Re Trulia Inc. Shareholder Litigation, which rejected disclosure-only settlement, “appears to have stabilized,” says the report by San Francisco-based Cornerstone Research, Shareholder Litigation Involving Acquisitions of Public Companies, Review of 2018 M&A Litigation.

On average, 90% of M&A deals were litigated between 2009 and 2015 pre-Trulia, according to the report. In 2016, the year of the Trulia decision, these fell to a 10-year low of 71%, but has rebounded and stabilized in 2017 and 2018 at 82%, according to the report.

“The lower propensity to challenge M&A deals still prevails,” said the report, however. The number of lawsuits per challenged M&A deal has remained around three since Trulia, compared with the 2009-2015 average of 4.7 lawsuits per deal. 

There has also been a shift toward federal courts. In 2018, 91% of litigated M&A deals were challenged in federal venues, down slightly from 96% in 2017, whereas the pre-Trulia average from 2009 through 2015 was 26%, according to the report.

The 3rd U.S. Circuit Court of Appeals in Philadelphia was by far the most active federal court in 2018, with 79 M&A cases, compared with 34 in 2017.

Among other findings, 43% of M&A deals were challenged in two jurisdictions in 2018, compared with 26% in 2017.