Issues Surrounding Mergers and Acquisitions

February 24, 2014

directors and officers insurance When companies are involved in mergers and acquisitions, there are numerous complicated legal issues that must be settled. Due to the complex nature of these matters, it is possible for litigation to arise at various points in the process. For this reason, many companies decide to purchase directors and officers insurance in order to reduce the expenses of potential lawsuits.




There are a number of reasons that companies choose to acquire or merge with another business. These may include:


  • Financial performance improvements
  • Long-term strategic moves
  • Obtaining another company‚Äôs talent pool
  • Reducing operations costs by purchasing a major supplier


Each of these scenarios carries some type of litigation potential. The last one, for example, could lead to an anti-trust suit by the government or a competitor.




While mergers and acquisitions have now become conflated to a certain extent, there are still some differences between the two. Financing, for example, is one way that mergers can vary from acquisitions; the latter are generally associated with transactions that are done through cash payments. If financing for a merger or acquisition is done improperly, it could lead to litigation.


Shareholder Issues


Sometimes, shareholders will decide to file a lawsuit as a result of a merger or acquisition. These can stem from a number of reasons; for example, if one or more executives or board members failed to fulfill their fiduciary obligations to the shareholders.


There are many ways that mergers and acquisitions can result in lawsuits, and regardless of whether these claims have merit, it is still very costly for companies to defend themselves. This is why many corporations rely on directors and officers insurance.

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