M&A Watch: A Quarter of Deals End Up on the Chancery Docket

There is a grim ritual to modern dealmaking: announce a large merger, and a shareholder lawsuit is all but guaranteed to follow. Because so many of the merging companies are incorporated in Delaware, a substantial share of that litigation lands on the Court of Chancery's docket, making the court an unofficial clearinghouse for merger disputes.

Not all of it is meritorious. For years, so-called strike suits challenged nearly every deal in hopes of extracting a quick settlement, and the court eventually cracked down on the practice, tightening the rules on disclosure-only settlements that benefited lawyers more than shareholders.

The cases that remain, though, do real work. They scrutinize whether a board shopped the company properly, whether conflicted insiders steered a sale, and whether shareholders received the information they needed to vote. The prospect of that scrutiny disciplines how deals are negotiated in the first place.

For investors, the docket is worth watching. A contested Chancery ruling on a live merger can move billions in value and set the template for how the next wave of deals is structured.