Dive into the intricate world of mergers and acquisitions with our latest blog post, ‘Navigating the Pitfalls: Whiskey Supplier’s Consent in M&A Sale of Distributorship.’ Explore the challenges faced in a recent Nashville-based distributorship asset sale, where securing the supplier’s consent became a critical juncture. Uncover the legal twists and turns, learn from a real-life case (Det Beverages, LLC v. Kentucky Bourbon Distillers, LTD.), and discover the crucial importance of adhering to state franchise laws during the consent process. Gain valuable insights for your M&A endeavors and stay informed on industry-specific legal nuances.
January 18, 2024
In the dynamic realm of mergers and acquisitions, the transfer of a whiskey distributorship is not without its intricacies. A pivotal aspect often overlooked is securing the supplier’s consent, a process intricately entwined with state law.
A recent case in point involves the asset sale of a Nashville-based distributorship, encompassing an exclusive right to distribute whiskey within specific Tennessee counties. Here’s the crux: the buyer sought the supplier’s blessing for the transfer of the seller’s franchise agreement, only to be met with a resounding refusal. The supplier, citing the selection of a more seasoned distributor for the seller’s market area, stood firm.
Undeterred, the buyer and seller contested the supplier’s stance, yet their efforts proved futile. Despite this setback, the deal proceeded, only for a post-closure twist – the supplier reneged on the supply agreement. In response, the buyer took legal action in a Nashville federal district court, seeking both the enforcement of the supply agreement and damages.
However, the court swiftly dismissed the case, revealing a critical misstep by the buyer and seller. Their failure to adhere to Tennessee’s statutory requirement during the consent request proved fatal. State law mandates a detailed disclosure of the deal’s terms to the supplier, triggering a 60-day window for consent or matching the offer. Failure to comply leaves the deal open to closure.
In essence, the court ruled that the buyer had no grounds to compel the supplier to fulfill the supply agreement due to the seller’s oversight in notifying the supplier of the deal’s specifics.
The takeaway from this episode resonates beyond the specifics of this case. For franchise deals, strict adherence to state franchise laws in securing franchisor consent is paramount. This episode underscores the importance of providing comprehensive details to the supplier during the consent process, ensuring compliance with statutory requirements.
Det Beverages, LLC v. Kentucky Bourbon Distillers, LTD., Case No. 3:23-cv-00363, United States District Court, M.D. Tennessee, Nashville Division January 4, 2024).
Thank you for reading this blog. If you have any questions, insights, or if you’d like to engage in a more detailed discussion on this matter, I invite you to reach out directly.
Feel free to send me an email. I value thoughtful discussions and am always open to connecting with business owners management, as well as professionals who share an interest in the complexities of M&A law.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Telephone: 714 273-6291
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