This is proving to be a blockbuster year for mergers and acquisitions. After a long period of stagnation during the financial crisis and its immediate aftermath, ample money — and appetite — now exists for deals to be struck by private-equity firms looking to buy into the upswing in the markets, as well as for corporations seeking to make strategic acquisitions. However, recent developments in Delaware law and innovations in the way these transactions are structured foretell an equally lively year for shareholder litigation.
Conditions are certainly right for the strong uptick in deals seen in 2010 to continue, and even accelerate. Interest rates are low and companies have been hoarding cash, so the ability to buy is strong. Perhaps more importantly, shares in many companies remain undervalued from an historical perspective, as many corporations still suffer from the hangover of our recent recession. This combination of buying power on the acquisition side and temporary depression in prices makes for an unusually risky climate for investors seeking to evaluate a takeover offer.
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