Many merger and acquisition (M&A) transactions involving companies incorporated in Delaware have been subject to litigation brought in the Delaware Court of Chancery by stockholders of the acquirer or target.
This report analyzes settlements in M&A-related litigation in the Delaware Court of Chancery between 2012 and 2024. The analysis in this report is based on a hand-collected sample of 118 such settlements with a known monetary settlement amount.
NUMBER AND TOTAL AMOUNT OF SETTLEMENTS
- Both the number and total amount of settlements of M&A-related litigation in the Delaware Court of Chancery have been rising since 2019.
- In 2024, there were 21 settlements in the research sample with a total settlement amount of $618.3 million, up from five settlements with a total settlement amount of $110.1 million in 2019.
- The median settlement amount during 2019–2023 ranged from $20.4 million to $34.4 million.
- In 2024, the median settlement amount was $16.5 million.
- The majority (over 80%) of settlements in the sample were below $50 million (97 out of 118).
- From 2022 to 2024, the most frequent settlement amount was in the $20 million to $49.9 million range, accounting for 18 settlements. In contrast, in previous periods (2012–2016 and 2017–2021) the most common settlement amount was under $10 million.
- The median transaction value associated with 2022–2024 settlements was $1.2 billion. The median transaction value associated with settlements in 2012–2016 and 2017–2021 was each $0.6 billion.
TRANSACTION VALUE
- Reported transaction value is correlated with the settlement amount, with larger transactions implying larger settlement amounts.
- There is a positive and statistically significant correlation between transaction value and settlement amount. Transaction value explains 36% of the variation in settlement amounts.
ALLEGATIONS
- Many settled cases include allegations of actions by a controlling stockholder and misrepresentations to minority stockholders.
- In 74% of settlements, plaintiffs’ allegations involved allegations about actions by controlling stockholder(s) that harm minority stockholders. This implies that a typical settlement involves allegations by a dispersed group of stockholders alleging they were paid unfair consideration for their shares caused by the actions of a controller.
- In 61% of settlements, allegations included misrepresentations in the transaction proxy disclosures.
SETTLEMENT CHARACTERISTICS
- Sample settlements are associated with M&A transactions that differ from a benchmark of all M&A transactions on several dimensions, including being more likely to involve a special committee, more likely to have investors publicly expressing opposition to the transaction, and less likely to have a no-shop provision.
- Moreover, while 86% of transactions in the settlement sample had a positive transaction premium relative to an estimate of unaffected price, 95% of transactions in the M&A Benchmark sample had a positive premium. The difference in proportion with a positive premium is statistically significant at the 1% level. The difference in average and median premia is, however, not statistically significant.
PLAINTIFF COUNSEL FEES
- Counsel fees are correlated with settlement amounts.
- Median plaintiff counsel fees during 2022–2024 ranged from $3.4 million to $8.9 million (ranging from 8.8% to 33.7% of the settlement amount).
- There is a statistically significant relationship between duration of litigation and the amount of plaintiff counsel fees as a percentage of settlement amount.
The views expressed herein are solely those of the authors and do not necessarily represent the views of Cornerstone Research.
