David Webber – Mergers and Acquisitions Litigation: Does the Lead Plaintiff Matter?
Mergers and acquisitions litigation has long been controversial in both the popular and the academic literatures. Yet, the debate over such litigation has thus far neglected to consider a change in legal technology, adopted in Delaware a decade ago, favoring selection of institutional investors as lead plaintiffs in these cases. My Article fills that gap, offering new insights into the utility of mergers and acquisitions litigation. Based on a hand-collected dataset of all Delaware class and derivative actions filed from November 1, 2003-Dec. 31, 2009, I find that institutional investors play as large a role in these cases as they do in federal securities fraud class actions, leading 41% of them. Controlling for the size of the deal and other factors, institutions are more likely to assume a lead role in transactions with less attractive or more coercive deal terms, like lower premiums over the trading price or controlling shareholder acquisitions. I present evidence that public pension funds, alone among institutional types, statistically significantly correlate with the outcomes of greatest interest to shareholders—an increase in the offer price and lower attorneys’ fees. The improvement in outcomes associated with public pension funds may be because they are better shareholder representatives. It may also be because they “cherry pick” the best cases, although I offer some evidence against this hypothesis. These results are consistent with the view that public pension funds outperform traditional lead plaintiffs as monitors of class counsel and that they improve outcomes for shareholders in mergers and acquisitions litigation.
Professor Webber joined BU Law from New York University Law School and the NYU Stern School of Business, where he was a Wagner Fellow at the Pollack Center for Law and Business. Prior to his fellowship, he litigated corporate and securities cases in New York and clerked for Judge Harold A. Ackerman of the United States District Court for the District of New Jersey. Professor Webber holds a B.A., magna cum laude, from Columbia University and a J.D. from the New York University School of Law, where he was a Lederman/Milbank Fellow in Law & Business and an editor for the NYU Law Review. He teaches civil procedure, securities regulation, and a seminar on shareholder activism.