Wachtell Lipton recently published the 2023 edition of its 235-page “Takeover Law and Practice” publication. It addresses directors’ fiduciary duties in the M&A context, key aspects of the deal-making process, deal protections and methods to enhance deal certainty, takeover preparedness, responding to hostile offers, structural alternatives and cross-border deals. As always, the publication is full of both high-level analysis and real-world examples. Here’s an excerpt from its discussion of M&A litigation:
Shareholder litigation challenging merger and acquisition activity remains common, and, continuing the trend sparked by the Delaware Court of Chancery’s 2016 Trulia decision curtailing the ability to settle such suits in Delaware by way of added disclosures, the bulk of these merger-objection suits in recent years have been styled as claims under the federal securities laws and were filed in federal court.
Recent reports from NERA and Cornerstone Research suggest that the number of such merger objection suits has significantly declined in the past two years. But these studies only account for class actions, and there has been a shift by stockholders toward filing merger objection suits on an individual basis rather than on behalf of a putative class, potentially to avoid class action filing limitations and disclosure requirements under the PSLRA, and therefore do not necessarily reflect any decline in the number of merger objection suits filed.
Merger objection litigation generally challenges disclosures made in connection with M&A activity under Sections 14(a), 14(d), and/or 14(e) of the Exchange Act and sometimes also alleges breaches of state-law fiduciary duties. The overwhelming majority of such federal suits were “mooted” by the issuance of supplemental disclosures and payments of the stockholder plaintiffs’ lawyers’ fees. Unless the federal courts begin applying heightened scrutiny to such resolutions akin to Delaware’s Trulia review of settlements, we expect this litigation-and-settlement activity will continue.
– John Jenkins, DealLawyers.com, May 4, 2023