Top Defense Research Articles

The impact on shareholder value of top defense counsel in mergers and acquisitions litigation

Defense litigation counsel are retained by target firm management to defend them in mergers and acquisition (M&A) litigation. We use hand collected data from a ten-year period (2003−2012) to examine whether the choice of defense litigation counsel affects the outcome of M&A litigation and shareholder value. We construct league tables for defense litigation firms and identify the top 10 defense litigation firms. Comparing these firms with all other defense litigation firms, we find that top defense litigation counsel are involved in a significantly higher proportion of cash deals, non-same-industry deals (implying a lower possibility of antitrust-related concerns), and friendlier deals, all of which are associated with smaller initial takeover premium proposals. We find evidence that, controlling for endogeneity, top defense litigation counsel negotiate cheaper and faster settlements than other defense litigation counsel thereby protecting low premium deals from more serious challenges. We also show that top defense litigation counsel are more effective in multijurisdictional litigation cases, again obtaining cheaper and faster settlements in low premium deals, which we theorize shows that they are better able to handle the complexity and strategy that accompany these lawsuits.

Divided Loyalties? The Role of Defense Litigation Counsel in Shareholder M&A Litigation

We examine the role of defense litigation counsel in mergers and acquisition (M&A) litigation. We theorize that defense litigation counsel may be incentivized to settle litigation on disadvantageous terms to shareholders in order to allow transactions to complete, and that more experienced counsel will engage in this conduct at a greater rate. We find that top defense litigation counsel is more likely to be hired to complete transactions priced at lower takeover premiums. We control for endogeneity and find evidence that top defense litigation counsel negotiate cheaper and faster settlements than other defense litigation counsel, particularly when the transactions involved have lower offer premiums, and that top defense litigation counsel take advantage of multi-jurisdictional litigation to achieve this result. Our results support the conclusion that top defense litigation counsel in M&A litigation may be adept at settling valid claims in order to allow for deal completion. Finally, we discuss the implications of forum selection bylaws and the near demise of disclosure-only settlements for top defense litigation counsel, and argue that these changes may reduce competitive advantages that these law firms previously enjoyed.

The Erosion of America's Defense Innovation

ABSTRACT America's defense innovation, despite its resilience and superiority, exhibits structural erosion and relative decline. This is evident when U.S. defense innovation is set in international perspective and current trends are highlighted in the evolution of U.S. defense R&D, key defense R&D actors, and top defense contractors. America's defense innovation is at the crossroads, which is reflected by cost pressures arising from sequestration and limited budgets; the decline of the U.S. industrial base and its ability to support defense needs; the bias for short-term policies; erosion of domestic defense innovation; and growing competitive challenges from other nations in terms of defense industries, including from low-cost producers. Absent a change in course, U.S. superiority in defense innovation and its competitiveness-enhancing impact on the U.S. economy are fading. A policy to restore defense innovation and production in the United States would pay dividends on two fronts: continued U.S. defense strength through superior technology and broader U.S. commercial global competitiveness.

War and the Art of Governance

Power is one thing. The problem of how to administer it is another. (1) --Douglas MacArthur On 9 April 2003, jubilant crowds and US troops toppled statue of Saddam Hussein in central Baghdad and drew down curtain on major combat phase of Operation Iraqi Freedom. Within hours of liberation of Baghdad, amid spreading disorder and growing expectations, debate began over reconstruction challenges ahead. Criticism and frustration with chaos on ground intensified over apparent failure of United States to plan adequately for restoration of political and economic order once major combat operations had ended. The root of Washington's failure to anticipate political disorder in Iraq rests precisely in characterization of these challenges as problems, a characterization used by virtually all analysts inside and outside of government. The Iraq situation is only most recent example of reluctance of civilian and military leaders, as well as most outside experts, to consider establishment of political and economic order as a part of war itself. The point is not academic. It is central to any effective reconstruction strategy in future wars and has profound implications for military's planning, command arrangements, and implementation of current and future governance operations. (2) Military and political leaders need to distinguish between governance operations, which are a core element of all wars, and activities such as peace operations and peacekeeping that may occur independently of war. Labeling political and economic reconstruction as a postwar problem muddles fact that central to strategic victory in all wars fought by United States has been creation of a favorable political order, a process overseen and administered by US military forces--usually Army. The United States entered virtually all of its wars with assumption that government of opposing regime would change or that political situation would shift to favor US interests. During Spanish-American War, we sought to change governments of Cuba and Puerto Rico, and succeeded. During Civil War, Washington was determined to change way South was governed. In Panama in 1989, United States ousted Manuel Noriega, and war did not end until regime against which US forces had fought was out of power and political stability had resumed. In virtually all contingencies, political leaders in Washington conceded that only US military forces were up to task of overseeing and implementing this final aspect of war. Arguably, 2003 war in Iraq is rooted in most prominent recent case where political order did not change--the 1991 Gulf War. Some top Defense Department leaders have called 2003 war a logical conclusion to 1991 campaign. President Bush's early concerns, which emerged during his presidential campaign, about involvement of US military forces in nation-building and peace operations stemmed from his desire to avoid overextending American resources and commitments. (3) A clear distinction between governance operations that are integral to war and myriad of missions referred to in peace operations discourse would be hugely beneficial. Such a distinction would allow US defense planners to focus on political and economic reconstruction that is a part of war, while relegating humanitarian and nation-building missions to other organizations. Moreover, equating governance tasks that occur in all wars with broader missions associated with peace operations and humanitarian assistance reinforces tendency to avoid planning for governance operations in tandem with planning for combat operations. The essential point is this: Combat operations and governance operations are both integral to war and occur in tandem. US soldiers in Iraq today are wondering why, if the war is supposed to be over, we are still being shot at. …

Money, Business, and the State: Material Interests, Fortune 500 Corporations, and the Size of Political Action Committees

This paper uses data from the Federal Elections Commission on political action committees, sponsored by Fortune 500 industrials in 1976 and 1980, to examine the determinants of business PAC size. Of the five groups of variables suggested by the extant PAC literature-availability of resources, free rider problems, material interests, previous campaign activity, and industry categories-just the measures of material interests have consistent and important effects on the level of firm political activity. Firms with the richest history of interaction with the state, top defense contractors, major acquirers of other businesses, and corporations prosecuted for criminal acts are the most politically active of large firms. Thus, while material interests are an important determinant of political action, this study suggests only interests tied to special long-term relationships with the state serve to increase the amount of political action, taken by large firms. These results suggest that the pluralist-based theory of business political involvement, so widely accepted among contemporary PAC researchers, is of little utility for explaining firm differences in political activity.