Navigating M&A Risks: Class Action Investigations and the Critical Role of Shareholder Voting

The second quarter of 2025 has emerged as a pivotal period for mergers and acquisitions (M&A), with several high-stakes transactions under legal scrutiny. As regulatory bodies and class action law firms intensify their focus on deal fairness, shareholders face a critical juncture: act decisively before voting deadlines or risk losing influence over outcomes. This article examines four pending mergers—Servotronics (SVT), Southern States Bancshares (SSBK), LENSAR (LNSR), and iCAD (ICAD)—to illustrate how legal challenges and voting timelines shape investment opportunities and risks.

The Dual Role of Class Actions in M&A

Class action lawsuits have evolved into a powerful tool for shareholders to challenge undervalued offers or opaque disclosures. By pressuring companies to renegotiate terms or settle disputes, these lawsuits often force acquirers to enhance bid terms or clarify risks. For instance, law firms like Monteverde & Associates are closely monitoring deals where valuation gaps or execution risks are evident. In such cases, litigation can either derail a transaction or, conversely, unlock higher shareholder value.

But timing is everything. Missing voting deadlines forfeits the right to vote or participate in class actions, leaving shareholders stranded without recourse. Below, we analyze four deals where this dynamic is most acute.

Case 1: Servotronics (SVT) – Cash Offer vs. Growth Potential

• Deal: TransDigm's $38.50 cash bid for SVT, a precision components manufacturer.
• Deadline: Tender offer expires June 30, 2025.
• Risk: The cash offer's simplicity reduces execution risk but may undervalue SVT's growth trajectory. SVT's niche in aerospace and defense parts, paired with rising demand for high-reliability components, could justify a higher valuation.
• Class Action Angle: Monteverde & Associates is evaluating whether the bid reflects SVT's intrinsic value. If the offer significantly lags behind discounted cash flow models, shareholders could demand a renegotiated price.

Investment Strategy: If SVT's valuation multiples (e.g., P/E, EV/EBITDA) are meaningfully lower than TransDigm's, shareholders should tender. Conversely, if growth catalysts suggest upside, hold out and monitor litigation outcomes.

Case 2: Southern States Bancshares (SSBK) – Banking Sector Volatility

• Deal: 0.80-share exchange with FB Financial (FBK), a regional bank.
• Deadline: Shareholder vote due June 26, 2025.
• Risk: FB Financial's stock has underperformed amid regional banking sector turbulence. The exchange ratio assumes SSBK's book value is fairly reflected in FBK's shares, but regulatory headwinds (e.g., interest rate pressures, capital requirements) could dilute returns.
• Class Action Angle: Law firms are scrutinizing the fairness of the ratio, particularly given FBK's price-to-book (P/B) ratio of 1.2x versus SSBK's 1.5x. If the deal undercompensates SSBK's shareholders, litigation could force a revised offer.

Investment Strategy: Vote against the deal if FBK's valuation metrics are weak relative to SSBK's standalone worth. Alternatively, support it only if synergies offset regulatory risks.

Case 3: LENSAR (LNSR) – Contingent Value Rights (CVR) and Execution Risk

• Deal: $14 cash per share plus a CVR up to $2.75, contingent on post-merger milestones with Alcon (a Novartis division).
• Deadline: Vote required by July 2, 2025.
• Risk: The CVR's value hinges on Alcon's ability to achieve revenue targets tied to LENSAR's cataract surgery technology. If milestones are missed, shareholders lose upside potential.
• Class Action Angle: Litigation may challenge the feasibility of milestones or the transparency of disclosures. If the CVR structure lacks downside protection, shareholders could sue for inadequate risk disclosure.

Investment Strategy: Vote in favor only if Alcon's execution history and LENSAR's product pipeline justify the milestones. Seek independent analysis of the CVR's probability of success.

Case 4: iCAD (ICAD) – AI Valuation Disputes

• Deal: 0.0677-share exchange with RadNet (RDN), a healthcare IT firm.
• Deadline: Vote by July 14, 2025.
• Risk: The low exchange ratio reflects skepticism about iCAD's AI-driven diagnostics platform. RadNet's stock, meanwhile, faces headwinds from reimbursement pressures and regulatory scrutiny in healthcare IT.
• Class Action Angle: Legal teams are questioning whether the offer fairly values iCAD's AI assets. If the bid undervalues the technology, litigation could demand a higher price or clearer synergies disclosure.

Investment Strategy: Reject the deal unless RadNet's growth prospects for iCAD's AI platform are compelling. Pressure the companies to disclose synergies or risk losing shareholder trust.

Strategic Considerations for Shareholders

1. Act Before Deadlines: Missing voting deadlines means losing influence. Even small shareholders can sway outcomes in contested deals.
2. Leverage Class Actions: Litigation often forces acquirers to improve terms. For example, 30% of M&A deals with class actions in 2024 saw bid increases post-lawsuit.
3. Focus on Valuation Gaps: Use multiples (P/E, EV/EBITDA) and growth forecasts to assess whether bids reflect true worth.
4. Monitor Regulatory Trends: The SEC's Staff Legal Bulletin No. 14M now bars exclusion of shareholder proposals unless they are “ordinary business” matters. This strengthens shareholder rights, especially in governance disputes.

Conclusion: Time is of the Essence

The second quarter of 2025 is a high-stakes period for M&A. Shareholders in the four highlighted deals must act swiftly to maximize value or mitigate risks. Legal scrutiny and voting deadlines are not mere formalities—they are strategic levers. For investors, the path forward is clear: do the math, watch the deadlines, and let litigation pressure guide your decisions. Those who wait risk being left behind.

This article is for informational purposes only and does not constitute financial advice. Always consult a professional before making investment decisions.