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Goldman Sachs merger complicated by shareholder lawsuits

Louisianans who know how complex the mergers and acquisitions process is will not be surprised to hear that even Wall Street titans like Goldman Sachs run into complications. The firm has seen several setbacks recently, all tied to business litigation struggles with a pension fund from Louisiana.

The Louisiana Municipal Police Employees Retirement System has been entangled with Goldman Sachs in a dispute concerning whether Goldman Sachs was really working in the benefit of its shareholders while orchestrating several high-profile mergers.

Goldman Sachs is now involved in another lawsuit, arguing that Wellpoint's acquisition of Amerigroup, a merger organized by the company, did not take the best interest of the shareholders into account. Their argument is that Goldman Sachs was instrumental in rushing the deal exclusively with Wellpoint, because they stood to gain roughly $233 million dollars from the agreement if it was finalized before a certain date. Representatives for the Louisiana-based pension fund say that this expedited process did not open itself up to other potential buyers and resulted in a lower selling price.

Furthermore, they argue that there is reason to believe that other companies were interested in buying Amerigroup and were also willing to pay higher amounts than Wellpoint offered. If these claims hold true, the court could rule that Goldman Sachs' influence in the transaction did not advance the interests of its shareholders.

Cases such as this show how even companies with established histories of mergers and acquisitions can suffer legal setbacks if there are accusations that they have not followed established laws, overlook important requirements, or look to profit themselves while shortchanging shareholders. For these reasons, any company considering a major business transaction should take the time to consider these issues before moving forward with a proposed deal.

Source: The Street, "Goldman Sachs Readies Bayou Battle: Street Whispers," Antoine Gara, Aug. 27, 2012

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