Merger lawsuits are on the rise

While investors in businesses have every right to assure their personal interests are protected, a New York Times article states that merger lawsuits are costing companies and shareholders an increasing amount of money and may not solve issues as effectively as a company sponsor may think.

Phoenix business attorneys with expertise in shareholders' disputes know that it may take millions of dollars to reach a settlement in such cases. For example, in October of 2011, Del Monte Foods had to settle similar litigation for $89 million while, in April, the Delphi Financial Group paid $49 million to reach a settlement in a merger lawsuit.

"Litigation can be effective in protecting shareholder interests in some deals, but questioning every deal seems to impose excessive costs on the companies involved and their shareholders. Shareholder plaintiffs now challenge virtually every large merger," the news source stated. "The allegations in each case are similar – the shareholders of the target company were paid too little and did not receive enough information about the deal."

A recent study shows that companies sold for more than $100 million in 2010 and 2011 had more than 1,500 lawsuits filed against them. The statistics show that 91 percent of these mergers were challenged by shareholders.

In fact, merger litigation grew during the recession. While in 2008, more than 70 percent of mergers had investor lawsuits filed against them, in 2009, that number rose to more than 90 percent. Last year, any combination between two companies faced an average of six lawsuits.

With merger litigation on the rise, business owners may need to partner with a small business attorney who has experience in shareholders' disputes.

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