Definition
Litigation risk in a tender offer encompasses the universe of legal challenges that can be brought before, during, or after the offer:
Common claim types
- Disclosure claims — alleged misstatements or omissions in Schedule TO / 14D-9
- Fiduciary duty claims — breach by target directors in approving (or rejecting) the deal
- Revlon claims — failure to maximize price in a sale-of-control transaction
- Unocal claims — disproportionate defensive measures
- Appraisal proceedings — minorities seeking judicial determination of fair value
- Antitrust challenges — DOJ or FTC suits to enjoin closing
- Regulatory enforcement — SEC investigations into trading or disclosure
Why it matters
Even meritless litigation can delay closing, create disclosure burdens, and leak settlement value (historically via “disclosure-only” supplemental disclosures with fee awards to plaintiff counsel).
Trends
Delaware courts have grown more skeptical of disclosure-only settlements; meritorious appraisal claims now face Section 262 amendments designed to discourage strike suits.