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Lawyers Challenge "Almost Every" Merger, Cornerstone Study Shows

Publication Date: 
April 26, 2012
Daniel Fisher

Professor Robert M. Daines spoke with Daniel Fisher of Forbes Magazine to discuss a report that he co-authored on lawsuits resulting from mergers and acquisitions worth more than $500 million.

If private securities litigation is designed to discipline corporate executives into doing the right thing, it definitely isn’t working.

A new report by Cornerstone Research finds that “almost every” merger and acquisition worth more than $500 million drew a lawsuit in 2010 and 2011, up from about half of the deals in long-ago 2007. So far this year, the group found, thirteen out of fifteen deals of that scale have drawn lawsuits — 67 of them, in fact, illustrating another finding of the report. Lawyers are ganging up on their targets more, with an average of 6.2 suits per deal compared with 2.8 suits per deal back in 2007.

“It’s one of the three inevitables: death, taxes and deal litigation,” said Robert Daines, a professor of business and law at Stanford Law School and a co-author of the report. “From a public policy perspective, it’s plausible to think there are problems with deals, but it’s really hard to believe there are problems with 100% of the deals.”


Daines and Olga Koumrian,a Cornerstone principal and co-author of the report, said there is little evidence disclosure statements have much effect.


But in the broader category of takeovers, Daines said, “the evidence is acquirers tend to overpay, not underpay.” The real victims of most takeovers, in other words, are the shareholders of the acquiring company.


Daines said it’s difficult for researchers like him to determine if all this litigation does any good at all.