Lawsuits arise for a number of reasons, and it is best to be prepared for them when possible. When lawsuits are filed in the process of Mergers and Acquisitions (M&A), businesses and those who run them could be held responsible for not upholding their fiduciary duties to shareholders in certain cases. M&A lawsuits are normally resolved quickly to allow the deal to go on with as little impact as possible.
Types of Litigation
Most litigation related to M&A lawsuits is filed by shareholders challenging a proposed transaction alleging that it is essentially unfair. Reasons for the unfairness can include transaction price, the procedure that brought the transaction to fruition, and insufficient disclosures made. Other litigation brought forth includes those by one party involved in the M&A to enforce the obligation itself.
Sometimes the lawsuits in these types of transactions are brought forth despite an honest effort by both parties to make an informed decision. The board of directors is obligated to prove that it acted in good faith in determining to approve the deal.
These lawsuits can be extremely costly as they normally involve paying both parties’ attorney fees in the event that the plaintiff is successful. Those responsible for M&A deals should do their best to protect themselves from these types of lawsuits by diligently working to fairly negotiate these transactions.