Cornerstone Releases Updated Study of M&A Litigation

On April 25, 2012, Cornerstone Research released an interesting report entitled “Recent Developments in Shareholder Litigation Involving Mergers and Acquisitions—March 2012 Update.”  The report notes that the incidence of litigation in connection with mergers valued at $500 million or greater rose from 57% in 2007 to 96% in 2011.  This observation has already caught the attention of the Delaware Chancery Court where Vice Chancellor Laster commented in a teleconferenced ruling, “I don’t think for a moment that 90%—or based on recent numbers—95% of deals are the result of a breach of fiduciary duty.  I think there are market imbalances here and externalities that are being exploited.  What this means is that the Court needs to think carefully about balancing.”

The report also shows that the number of lawsuits per litigated deal increased from an average of 2.8 in 2007 to 6.2 in 2011.  The absolute count of lawsuits involving deals with values of $500 million or greater also nearly doubled from 289 in 2007 to 502 in 2011.  The report also noted that as of March 2012, 67 lawsuits have already been reported for 13 out of 17 deals announced during January and February.