In this blog post, we explore the crucial role of earnout agreements in M&A transactions and why Delaware’s implied covenant of good faith and fair dealing is not sufficient protection for sellers. A recent Delaware Court of Chancery case underscores…
Monthly Archives: February 2025
Why Delaware’s Implied Covenant of Good Faith and Fair Dealing Is Not Enough Protection for an Earnout
Posted in Express efforts clause vs. Delaware's implied covenant of good faith and fair dealing, problems with earnouts Tagged with: Breach of contract, commercial reasonable efforts, Contractual obligations, Delaware court decision, Delaware Court of Chancery, Earnout agreements, earnout milestones, express efforts provision, good faith efforts, implied covenant of good faith and fair dealing, M&A lawyers, M&A legal considerations, M&A legal disputes, M&A negotiation, M&A seller protections, M&A transaction risks, private company deals, Private Equity, seller vulnerability, seller's rights
When Does an M&A Indemnification Claim Accrue? The Difference Between First-Party and Third-Party Claims
Understanding when an M&A indemnification claim accrues is critical for buyers and sellers in private company transactions. This blog explores a Delaware case that clarifies the distinction between first-party and third-party indemnification claims and how survival provisions impact post-closing disputes.…
Posted in indemnification, survival period commencement, third party Tagged with: breach of contract statute of limitations, breach of representations and warranties, buyer protection in M&A, contract survival periods, Delaware M&A law, Delaware purchase agreement disputes, first-party vs third-party indemnification, indemnification litigation, M&A indemnification claims, M&A risk allocation, material handling system disputes, Post-closing disputes, private company acquisitions, Seller liability, settlement timing in indemnification, survival provisions in M&A, third-party claims in M&A
Earnouts and the Importance of Key Employee Retention
M&A earnouts pose significant risks for sellers, especially when buyers control post-closing business performance. This blog examines a case where a seller lost a $5 million earnout after a private equity buyer moved key employees to a separate management company.…
Posted in Key Employee Retention Requirement, problems with earnouts Tagged with: Acquisition Agreements, acquisition structuring, Breach of contract, Business acquisitions, Contract Obligations, Delaware Superior Court, earnout litigation, EBITDA targets, financial performance in M&A, key employee retention, Legal Risks in M&A, M&A Dispute Resolution, M&A earnouts, management company strategy, Post-closing disputes, post-closing employment issues, private equity acquisitions, private equity roll-ups, purchase agreement enforcement, seller protections
Undisclosed Founder Loan Leads to Post-Merger Liability
Undisclosed shareholder loans can become post-merger liabilities, creating unexpected financial exposure for buyers. This blog explores a real M&A case where a founder’s unrecorded loan led to legal disputes after a merger. Learn how courts interpret implied repayment obligations, why…
Posted in Problems with Undisclosed Liabilities Tagged with: Acquisition Agreements, asset vs. stock purchase, balance sheet risks, Business acquisitions, business law, corporate finance, deal structuring, due diligence, founder loans, implied contracts, legal pitfalls in M&A, M&A Disputes, M&A litigation, merger liabilities, New York M&A Cases, post-closing risks, private company M&A, shareholder loans, startup funding, undisclosed liabilities
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