By Casey Sullivan
(Reuters) - Nearly all large U.S.
merger-and-acquisition deals in 2012 were challenged by
investors in lawsuits that alleged conflicts of interest or
financial improprieties, according to a new study.
Shareholder lawsuits were filed in 96 percent of M&A deals
valued at more than $500 million, according to the study by
Stanford Law School and Cornerstone Research. This is the second
year in a row that the percentage hit 96 percent, the study
"The three certainties in life are death, taxes and deal
litigation, and that hasn't changed," Stanford Law School
professor Robert Daines said in an interview.
The total number of shareholder lawsuits arising from the
mergers and acquisitions declined, however, to 429 last year,
down from 504 in 2011. Daines attributed that decline to lower
M&A activity as opposed to investors bringing fewer lawsuits.
More than 80 percent of M&A shareholder settlements resulted
in additional disclosures by the company rather than a
significant monetary settlement, the study found.
"It becomes a cost of doing (M&A) and a nuisance in most
cases where there really hasn't been anything wrong in the
process," said Gary Kubek, a partner in the shareholder
class-action practice at Debevoise & Plimpton.
"They are essentially acknowledging that when they agree to
settle for a disclosure," he said.
At the same time, the study said, two of the largest M&A
settlements of the last decade were reached during 2012,
including a $110 million settlement in the El Paso Corp and
Kinder Morgan Inc deal and the $49 million settlement in the
acquisition of Delphi Financial Group Inc. by Tokio Marine
Stuart Grant, a plaintiffs' lawyer with Grant & Eisenhofer
who represented shareholders in those settlements, said there
was an oversaturation of shareholder M&A litigation. But he also
argued that the rise in lawsuits has effectively regulated
corporate America in a way that the Securities and Exchange
Commission and other government agencies have not.
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