According to Cornerstone Research, shareholders in 2012 “challenged 93 percent of merger and acquisition (M&A) deals valued over $100 million and 96 percent of transactions valued over $500 million”. Most of those cases settled and in more than 80% of the settled cases, the only relief was additional disclosure. I think it is agreed by all parties that this prodigious number of lawsuits with such little value added is in the present deplorable state of the country a very great additional grievance. Therefore, whoever could find out a fair, cheap, and easy method of making these M&A transactions sound, useful members of the economy, would deserve so well of the public as to have his statue set up for a preserver of the nation.
As to my own part, having turned my thoughts for many years upon this important subject, and maturely weighed the several schemes of other projectors, I have always found them grossly mistaken in the computation. I shall now therefore humbly propose my own thoughts, which I hope will not be liable to the least objection.
I do therefore humbly offer it to public consideration that certificates of mergers include an additional box that may be checked. If this box is checked, an additional fee will be imposed for filing the certificate but stockholders will forfeit all rights to sue in relation to the merger. The amount of the fee will be based on a percentage of the merger consideration. The fees will be allocated to any plaintiffs’ firm providing useful suggestions for enhanced disclosures. A further refinement might be to apply a multiplier randomly to some fees so that the economic windfall attributes of the current system are preserved.
I think the advantages by the proposal which I have made are obvious and many, as well as of the highest importance:
First, the burdens on the courts will be significantly reduced.
Second, shareholders will benefit by the significant reduction in legal fees paid to both plaintiff and defense counsel.
Third, society will benefit from reduced transaction costs.
Fourth, beneficial merger transactions will not be delayed.
Fifth, plaintiffs’ law firms will be compensated for improving disclosures in M&A transactions.
Many other advantages might be enumerated.
I can think of no one objection that will possibly be raised against this proposal. I profess, in the sincerity of my heart, that I have not the least personal interest in endeavoring to promote this necessary work, having no other motive than the public good of my country, by advancing our trade, providing for shareholders, relieving the poor, and giving some pleasure to the rich. Apologies to Swift, but with a greater nod to Horace than Juvenal.