D&O insurance is a fig leaf. Like all insurance, as claims rise, so do premiums. Ultimately, the cost comes out of shareholder pockets (plus administrative costs and insurance company profit).
Scortched earth is a risky way to try to kill a merger. e.g. Yukos management recent attempt to sabotage tax sale of subsidiary resulted in proceeds insufficient to pay tax bill-> rest of company now will be dismantled for tax bill.
Damaging TCR may simply cause terms to be renegotiated with part of payment to TCR shareholders withheld to cover costs of litigation. Such contingency clauses are more common in private deals. Due to costs, public companies often buy insurance--at sellers expense, an insurance company takes over the risk. Again shareholders get a reduced price.