As reported by Cornerstone Research, Advisen and others, the frequency and volume of shareholder derivative and class action lawsuits challenging mergers and acquisitions of U.S. public companies have skyrocketed in recent years. In 2007, only 53 percent of all M&As valued at $500 million or more encountered legal challenges by the target’s shareholders in the form of multiple derivative and/or class action lawsuits against the target’s board of directors. By 2011, the rate of M&A objection suits had practically doubled: Nearly all (96 percent) of the larger M&A deals and the vast majority (85 percent) of smaller combinations (valued between $100 million to $500 million) faced an average of four separate shareholder lawsuits per deal, with some transactions attracting more than 15 lawsuits, according to Cornerstone’s “Recent Developments in Shareholder Litigation Involving Mergers and Acquisitions.” In light of this rapid growth, M&A objection suits now represent more than 25 percent of all securities suits filed, up from 8 percent in 2004, according to Advisen’s “Securities Suits Remain Off Recent Highs.”
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