Boston Bar Journal: Merger Litigation: Coming to a Deal Near You

By Matthew C. Baltay

Shareholder litigation challenging mergers has become so ubiquitous that one observer has remarked that “[i]t’s one of the three inevitables: death, taxes and deal litigation.”[1]  Indeed, over 90% of all public company mergers with a value of $100 million or more result in shareholder litigation today.  While not as active a forum as Delaware or California for these cases, Massachusetts nevertheless is a top-six contender for merger litigation because of its relatively robust public market base.  This article provides an overview of the rise of merger litigation and examines how these cases tend to play out.

The Chances Are

It used to be that the acquisition of a public company, whether by another public company or a private equity group, would generally not result in litigation absent special circumstances such as a hostile takeover or where an unfair deal was being forced on shareholders by insiders who stood to gain.  A leading example is the case of Coggins v. New England Patriots Football Club, Inc., 397 Mass. 525 (1986), wherein public shareholders of the Patriots Football Club filed suit after they were cashed out by the majority owner.  The court found that the “freeze-out merger” did not serve any valid corporate objective but rather was done solely to further the personal financial interests of the majority shareholder.  Historically, approximately one-third of public company acquisitions nationally resulted in litigation.[2]

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