Merger objection cases down 42%

It does not take long following the announcement of a merger or acquisition, for there to be an announcement of at least one lawsuit from a shareholder who objects to the terms.

Advisen has noted that many of these cases are settled by what are known as “disclosure only” settlements. Companies agree to additional disclosures or other non-cash relief, plus payment of plaintiffs’ attorneys fees.

According to Advisen Loss Insight, the number of new M&A objections cases has fallen 42 percent over the last three years following steady growth in new filings between 2006 and 2011.

Several sources, including this paper from Troutman Sanders, recount how several jurisdictions are beginning to look harder at attorneys’ fee awards in disclosure-only settlements over the last few years. If the goal, at least in part, of the court is to quash the frequency of M&A objection lawsuit, the data may suggest it is working.

Still, merger objection actions accounted for 21 percent of lawsuits that would trigger a D&O policy during the 2014 fourth quarter. Capital regulatory actions by far represented the largest number of new events.

For all of 2014, merger objections accounted for 18 percent of suits filed, according to Advisen. Capital regulatory actions made up 52 percent.

According to Advisen Loss Insight, the manufacturing industry accounts for nearly 40 percent of merger objections–double the next industry source of merger objections: finance, insurance and real estate.

New technologies and a need to create synergy among them typically drives the M&A market in manufacturing.