Tag archives: litigation

Dealing with pending or threatened litigation in M&A

A significant consideration when considering an M&A target can be the impact that pending or threatened litigation has on the proposed transaction.

While some organizations may balk at the idea of acquiring a target that is (or is likely to be) the subject of a lawsuit, such companies are often available at significant discounts to purchasers that are able to understand and address the risks.

Each transaction will have its own unique considerations. However, an organization that is contemplating acquiring a target that is the subject of pending or threatened litigation should, among other items, address the following high-level considerations:… Continue Reading

Can a cause of action be assigned in a corporate transaction?

What happens when a key asset of a target corporation is a cause of action? Can it be assigned to the purchaser in an asset purchase or to a “Newco” in a corporate restructuring?

It is a longstanding common law principle that a bare right of action in tort is not assignable. This is because it is considered to be tainted by “maintenance” or “champerty”. “Maintenance” occurs when a third party who does not otherwise have an interest in the litigation provides financial or other assistance to one of the parties to the litigation. “Champerty” involves a third party engaging … Continue Reading

Delaware North? The (potential) rise of appraisal litigation in Canada

Under Delaware law and most Canadian corporate statutes, a shareholder who votes against a fundamental transaction—such as a going-private transaction or a sale of all or substantially all of the corporation’s assets—is entitled to object to the consideration offered and in turn require payment of the “fair value” of his, her or its shares as appraised by court. Where an investor concludes that there is a significant gap between the price of a M&A transaction and the fair value of the shares, the threat of the exercise of such appraisal rights can be used as leverage for improvement in the … Continue Reading

Post-deal litigation: what it is and how to avoid it

A recent article by PWC which appeared in Lexpert Magazine draws attention to a phenomenon that is pervasive in the United States and is becoming much more common in Canada: post-deal litigation. 

What is it?

Increasingly, shareholders are filing lawsuits to challenge M&A transactions. The litigation often takes the form of a class action, with plaintiff’s counsel alleging a breach of fiduciary duty on the part of the target’s board of directors resulting in a failure to maximize shareholder value. The specifics of the complaint are typically related to the process followed, the price agreed to, or insufficiency of disclosure.… Continue Reading