At 7 a.m. on March 13, the hedge fund Apollo Global Management announced that it would acquire Great Wolf Resorts, Inc., for $5 a share — a 50 percent premium over the average share price during the previous 90 days for the Madison, Wisconsin – based water park operator. Within five hours, eight law firms in different states had issued press releases saying that they were investigating the $703 million deal for evidence that directors breached their fiduciary duty by failing to seek a better deal. They urged potential plaintiffs to get in touch.
Both the threat of the suits, and the speed with which they were announced, are part of the booming trend of merger objection litigation. According to a new analysis by law professors Matthew Cain of the University of Notre Dame and Steven Davidoff of Ohio State University, 94 percent of M&A deals over $100 million last year faced litigation — up from 85 percent in 2010. Cain and Davidoff found that, on average, 4.8 lawsuits were filed per deal.
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