As a shareholder in a public company, you want to see the business grow and expand. Mergers and acquisitions often serve as an option to make that happen.
While you hope that the decision comes with solid research, proper negotiations and meeting all state and federal requirements, that does not always happen.
Once a company has reporting obligations, it must follow specific laws and provide numerous reports and disclosures. Part of that includes proxy statements. Although you may not have involvement in day-to-day operations, you do have certain rights as a shareholder. Those rights include casting votes to elect new directors or get your say on impactful business topics and approving any merger or acquisition. If a company does not get approval from its shareholders and board of directors, along with satisfying duties and following merger laws, it risks facing a lawsuit.
If the prospective merger benefits certain parties instead of the company, it may indicate a fiduciary duty breach. While not always readily apparent, key red flags include lack of due diligence, miscalculation of advantages, poor communication and an overestimate of the other company. As a shareholder, you should also focus on the share value. Although share prices change, a projection analysis may still provide the necessary information to help determine if the offer equates to a fair amount for shareholders. Additionally, if you have met certain criteria, you can inspect the business’s business records to ensure no wrongdoings have taken place.
If the deal seems shady, a lawsuit may help ensure that a company fulfills its duties and increases the transparency of what happens behind the scenes.