Professors Davidoff, Cain Analyze Takeover Litigation In 2011

Professors Davidoff, Cain Analyze Takeover Litigation In 2011

In their paper "A Great Game: The Dynamics of State Competition and Litigation" (here), Ohio State Law Professor Steven Davidoff and Notre Dame Finance Professor Matthew Cain analyzed the M&A related litigation during the period 2005 to 2010. I discussed this article in a prior post, here. In a newly released February 2, 2012 paper entitled "Takeover Litigation in 2011" (here), Professors Davidoff and Cain supplement their prior research with the preliminary statistics for takeover litigation in 2011.

The authors review all 2011 transactions involving U.S. exchange traded companies with a deal size over $100 million, an offer price of at least $5 per share, with a publicly available merger agreement and a closing date by January 12, 2012. There were 103 transactions that met these criteria, which represents a slight decline from the 124 transactions in 2010. However, the 2011 figures do not include pending transactions from 2011, so these figures could change as more of the deals are completed.

But while the absolute number of transactions declined slightly in 2011, the number of transactions that attracted lawsuits increased, at least as a percentage matter. The authors found that while 84.6% of mergers attracted litigation in 2010, the percentage rose to 94.2% in 2011. The authors noted  in their original paper that in 2005 only 38.7% of deals attracted litigation, so the litigation is now brought "at a rate almost 2.5 times that of 2005. The authors expect that as the pending 2011 deals are completed "we expect that the ultimate 2011 litigation rate will match or exceed the 94.2% figure."

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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.

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