Only two percent of M&A lawsuit that settled in 2013 involved a monetary payment to shareholders, according to the latest report on M&A lawsuit settlements from Cornerstone Research. The report, entitled “Settlements in Shareholder Litigation Involving Mergers and Acquisitions: Review of 2013 M&A Litigation” (here), is the second part of a two-part series on M&A litigation. Cornerstone’s earlier report on 2013 M&A lawsuit filings trends can be found here. Cornerstone Research’s April 15, 2014 press release about its latest report can be found here.
According to the report, monetary settlements related to M&A lawsuit were rarer in 2013 compared to prior years; only two percent of M&A lawsuits settled in 2103 involved a monetary contribution, compared to over five percent in prior years. In addition, there were only two M&A lawsuit settlements in 2013 for over $5 million (CNX Gas, $42.7 million; BMC Software, $12.4 million), compared to three in 2012 and six in 2011.
Supplemental disclosures remained the only shareholder consideration in the majority of 2013 M&A lawsuit settlements. Nearly 92 percent of M&A lawsuit settlements reached in 2013 includes additional disclosures or additional disclosures plus other terms. As in prior years, over 90 percent of the settlements were reached before the deal closing.
Interestingly, the fees the plaintiffs’ counsel are requesting are as a general matter declining, both with respect to M&A settlements taken as a whole and with respect to disclosure only settlements. Average fees requested by plaintiffs’ counsel declined to $1.1 million in 2013, compared to $1.4 million in 2011 and 2012. Average fees requested in disclosure only settlements declined in 2013 to $500,000, compared to $513,000, down from $953,000 as recently as 2008.
Over the last four years, the plaintiffs’ attorney’s fees requested in the Delaware Court of Chancery are slightly lower than in other courts. Over the same period, the Delaware Chancery Court approved, on average 80 percent of the requested fees, compared to 90 percent in other courts. Delaware Chancery Court granted less than the requested fees in 35 percent of settlements, compared with only 18 percent for other courts.
A number of specific factors affect the size of the fee award. Plaintiff attorney fee awards were higher in settlements with monetary consideration and with reduced termination fees. Between 2007 and 2013 plaintiffs fee awards were 22 percent higher in settlements involving a monetary fund. Fee awards were also higher in settlements with higher than average number of lawsuits and in cases where settlements took longer than average to reach. The reports analysis shows that attorneys fees awarded increased on average by $147,000 for each additional lawsuit above the average of five lawsuits per deal. On average, the attorneys fee award increased by $1,100 per additional day between lawsuit filing and settlement above the average of 113 days.
The press release accompanying the report quotes Dr. Lassaad Adel Turki of Cornerstone as saying “We’ve seen a steady decline over the last seven years in aver plaintiff attorney fees in disclosure-only M&A litigation settlements. This decrease may reflect the courts’ apparent growing skepticism for settlements where shareholders do not stand to benefit monetarily.”