Settlements of Shareholder Litigation Involving M&A

John Gould is senior vice president at Cornerstone Research. This post discusses a Cornerstone Research report by Olga Koumrian, titled “Settlements of Shareholder Litigation Involving Mergers and Acquisitions,” available here.

Only 2 percent of lawsuits filed in response to M&A deals that settled in 2013 produced monetary returns for shareholders. These findings are published in Settlements of Shareholder Litigation Involving Mergers and Acquisitions, which follows an earlier report on M&A filings and litigation outcomes issued this year by Cornerstone Research. Legal challenges to M&A deals resulted in only two monetary settlements in 2013, down from four in 2012 and seven in 2011.

The report also finds that plaintiff attorney fees awarded in disclosure-only settlements of M&A cases continued to drop in 2013. In addition, over the last four years, the Delaware Court of Chancery approved 80 percent of the fee amounts requested in such cases, compared with 90 percent in other courts.


Dr. Lassaad Adel Turki, senior vice president of Cornerstone Research and head of the firm’s finance practice:

We’ve seen a steady decline over the last seven years in average plaintiff attorney fees in disclosure-only M&A litigation settlements. This decrease may reflect the courts’ apparent growing skepticism for settlements where shareholders do not stand to benefit monetarily.

Olga Koumrian, principal of Cornerstone Research and author of the report:

The percentage of Delaware-incorporated target companies that settled in the Delaware Court of Chancery decreased in 2013. Delaware Chancery was the approving court in 41 percent of such settlements, compared with more than 50 percent in the prior two years.

More Key Findings

  • Supplemental disclosures remained the only shareholder consideration in the majority of 2013 settlements.
  • Over 90 percent of the known 2013 settlements were reached before the merger was closed.
  • Average fees requested by plaintiff attorneys in 2013 declined to $1.1 million from $1.4 million in 2011 and 2012.
  • Between 2007 and 2013, plaintiff attorney fee awards in M&A deals were higher in settlements with monetary consideration (by an average of 22 percent of the settlement fund) and with reduced termination fees (by an average of $260,000 for a 10 percent reduction).
  • Fee awards between 2007 and 2013 also were higher in settlements with a larger-than-average number of lawsuits, and in cases where settlements took longer than average to reach.

The full study is available here.

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