Large Technology Merger

The target company’s shareholders sued to stop one of the largest acquisitions in the technology sector of the late 2000s.

The target company’s shareholders sued to stop one of the largest acquisitions in the technology sector of the late 2000s. The merging parties retained Cornerstone Research and a law professor to evaluate the plaintiffs’ allegations that the merger proxy did not contain sufficient disclosures for shareholders to cast an informed vote and that certain terms of the merger agreement were unusually restrictive. In order to compare the disclosures and deal terms in this case with those of standard industry practice, our expert collected and reviewed proxies for recent similar mergers. Since these were final proxies for completed deals, they had already passed shareholder scrutiny and any preliminary injunction hearings, and therefore provided objective evidence of the industry standard for disclosure. None of the companies in this sample disclosed the specific elements that the plaintiffs claimed were most important and were undisclosed in this instance.

The preliminary injunction was denied by the state court, and the plaintiffs were denied fees in connection with the action.

The evidence demonstrated that the disclosures requested were not judged by the industry to be economically material to shareholders. Our expert showed that the requested disclosures were especially unimportant in view of the open and competitive sales process that had revealed sufficient information about the company’s fair value. Similar analysis demonstrated that the deal protections used in this case were routinely adopted by boards. The preliminary injunction was denied by the state court, and the plaintiffs were denied fees in connection with the action.