It was entirely predictable that last spring, after Safeway announced that it had agreed to accept a $9.2 billion offer from the private equity firm Cerberus Capital, shareholders would rush to file suits challenging the deal. As you know, shareholder M&A suits have become an inevitable consequence of merger announcements, and, to the frustration of defendants, are often brought in more than one jurisdiction — which has meant, in years past, that if defendants couldn’t persuade judges to defer to other courts, they sometimes had to defend against the same claims by multiple plaintiffs firms in multiple courts.
In his latest update on class actions filed in the wake of deal announcements, Dealbook’s Deal Professor Steven Davidoff (whose day job is teaching law at Ohio State) found that in 2013, shareholder suits followed almost all – 97.5 percent – deals of more $100 million. That’s not quite as inevitable as night following day but it’s getting there, especially when you consider that the rate of post-M&A class action filings is up from 91.7 percent in 2012 and 39.3 percent in 2005. Companies grumble all the time that these suits are nothing more than a “deal tax,” a sort of legal extortion racket by plaintiffs lawyers whose true motive is not enhancing shareholder value but skimming millions in fees for holding up transactions with silly claims.