Monthly Archives: May 2019

Asset Buyer Fights Customer Claim Based Upon Unassumed Seller Contract

Introduction A buyer and seller agree to a price for the sale of the seller’s company. Then the buyer gets his or her adviser involved to iron out the details. One of those details is whether the transaction will be

Posted in asset purchase agreement, assignment of contracts, assumed liabilities, assumption of a contract, consent to assignment, due diligence Tagged with: , , ,

Seller Argues That Indemnification Cap Applies to Excluded Liabilities

Introduction An advantage of an asset sale is that a buyer can pick and choose which seller liabilities the buyer wants to be responsible for under the asset purchase agreement; often referred to as the assumed liabilities. However, the buyer

Posted in asset purchase agreement, excluded or retained liabilites, indemnification cap, post closing covenants Tagged with: , , , ,

Business Buyer and Seller Battle over Indemnification Cap Language

Introduction Over the years sellers of businesses have often been able to limit their risk of post-closing indemnification claims from the buyer using indemnification caps, deductibles and threshold provisions in purchase agreements. It is quite common for a buyer to

Posted in indemnification cap, percentage of purchase price Tagged with: , ,

Buyer of Chemical Division Sues Seller for Understating Costs

Introduction There are unique risks for a buyer when purchasing a division of a seller (called a divestiture). It is easier to assess the quality of earnings of a stand alone business than with a division where costs must be

Posted in divestitures, due diligence, quality of earnings assessment Tagged with: , ,

Business Seller Accuses Buyer of Earnout Manipulation

Introduction A seller of a business wants to receive the highest price, and payable in cash at closing. The buyer might want to pay seller’s price but is not sure it is worth that much. How do you bridge the

Posted in bad faith, earn outs Tagged with: , , ,

Business Buyer Risks Loss of Assets to Secured Creditor

Introduction Many companies put their assets up as collateral for financing. A buyer of a company needs to know this before buying the business. This risk is minimized in part by the seller representing and warranting in the purchase agreement

Posted in due diligence, liens, UCC search Tagged with: , ,

No Buyer De Facto Merger Successor Liability for Seller Debt

Introduction One risk in buying the assets of a business is being sued by a seller creditor for a seller liability that the buyer did not assume in the asset purchase agreement. This risk is much higher when buying all

Posted in all cash deal, de facto merger exception, seller ownership in buyer, successor liability Tagged with: , ,

Prospective Buyer Had No Duty to Negotiate in Good Faith with Seller

Introduction Selling a business is an involved process. A prospective buyer first usually wants to see some basic financial information about the business. But before that happens, the seller often asks the prospective buyer to sign a confidentiality agreement. The

Posted in asset purchase agreement, Duty to negotiate in good faith Tagged with: , , , , ,

M&A Confidentiality Term Permitted Seller’s Post Closing Use of Customer Info

Introduction A buyer of a business often pays a significant part of the purchase price for the company’s confidential information; such as customer contact information, pricing, cost structure and terms. As a result, the seller usually agrees in the purchase

Posted in covenant not to compete, public information exclusion Tagged with: , ,

Seller’s Stock Purchase Agreement Disclosure Schedule Blocks Buyer’s $1.4 Million Claim

Introduction The buyer of a company wants to minimize the risk that it overpays for a company. One way to minimize this risk is thorough due diligence. Find out everything you can about the target business. In addition, the buyer

Posted in disclosure schedule, No Undisclosed Liabilities, stock purchase agreement Tagged with: , ,

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