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In two recent studies of shareholder class actions over corporate mergers, the authors reached conclusions consistent with our experience with such cases in North Carolina: that nearly every acquisition of a public company results in shareholder litigation. The Cornerstone Research report found that 93% of public company acquisitions were challenged. Takeover Litigation in 2014, a separate study by Matthew Cain of the SEC and Steven Solomon of UC Berkeley, found that 94.9 of deals were challenged. (The two studies used slightly different cutoffs for their samples.)
Both reports found that the number of cases filed in multiple jurisdictions is on the decline, and they speculate that this may result from an increase in companies with forum selection clauses in their bylaws. Both reports also found that the average number of suits challenging each transaction had declined slightly, from over 5 to 4.3 (Cain & Solomon) or 4.5 (Cornerstone).
The vast majority of these shareholder class actions, over eighty percent, settled for additional disclosures of information to shareholders. Most of the remaining cases were resolved for changes to deal protection provisions or reductions in termination fees. Few cases involved monetary payments to shareholders.
The reports do not provide information on specific states apart from Delaware. Although our experience in North Carolina is generally consistent with these findings, North Carolina law differs from Delaware law in important respects, and our sample size is not large enough to confirm national trends.
(Robinson Bradshaw has represented companies, boards of directors, and private equity purchasers in numerous shareholder class actions challenging corporate mergers, including the defense of suits against the Duke Energy/Progress Energy merger, the Wells Fargo/Wachovia merger, and multiple going private transactions between public companies and private equity firms.)
