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Plaintiff law firms often announced their investigations within hours of the merger announcement and filed lawsuits an average of 14 days after the announcement. Most (more than 60 percent) of these cases settled. The average time between lawsuit filing and settlement was 42 days. In more than 80 percent of settlements the only relief to shareholders was additional disclosures. In settlements related to the 2012 deals, the average agreed-upon plaintiff attorney fee was $725,000. In disclosure-only settlements, the average requested fees declined for the third consecutive year to $540,000.
The report’s authors found that several factors had influenced the amount of plaintiff attorney fees awarded by the Delaware Court of Chancery: the size of the settlement fund, other monetary benefits to shareholders, the number of suits filed, the time to settlement, and the overall deal value.
Two of the largest M&A settlements of the last decade were reached during 2012: $110 million in the El Paso Corp./Kinder Morgan Inc. deal and $49 million in the acquisition of Delphi Financial Group, Inc. by Tokio Marine Holdings, Inc. Both of these settlements involved allegations of significant conflicts of interest—a typical allegation in most of the lawsuits that resulted in large settlements.
In a new category of lawsuits modeled after M&A litigation, plaintiff attorneys challenged the compensation disclosures included in annual proxy statements. In these cases, they asked judges to halt upcoming shareholder votes unless additional disclosures were made by the companies involved in the transactions. At least 25 of these lawsuits were filed last year, and in the last 2 months of 2012 plaintiff law firms announced investigations of 33 more companies.
The full text of the report is available: Shareholder Litigation Involving Mergers and Acquisitions.
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