Blog Archives

Ambiguous APA Forum Selection Clause Did Not Waive Right to Remove to Federal Court

January 10, 2020 Introduction Acquisition documents often have a forum selection clause. And like any provision ambiguity can invite a dispute if litigation breaks out after the closing. The deal The seller was a manufacturing company located in Butler County,

Posted in forum selection clause, waiver of removal to federal court Tagged with: , , , ,

No Seller Indemnification Obligation to Buyer for Recall of Pre-Closing Product

December 19, 2019 Introduction The buyer of a manufacturing company runs the risk of having to repair or replace a product made by the seller before the closing. One risk is the cost of a recall of a product line

Posted in breach of representations and warranties, financial representation and warranty, indemnification, indemnification for pre-closing product loss, MAE rep, No Undisclosed Liabilities, representations and warranties

Buyer’s Indemnification Claim Notice Tolled 1 Year Contractual but Not 3 Year Statutory Limitations Period

December 11, 2019 Introduction The buyer of a privately held business often has a deadline to make an indemnification claim for the breach of a seller representation and warranty. This survival period in an acquisition agreement often expires sometime from

Posted in extension by contract in Delaware, indemnification, Intellectual Property, statute of limitations, survival of covenants, survival of reps and warranties, tolling Tagged with: ,

Monthly Financial Statements Not Covered by Financial Representation Covered by Books & Records Representation

Introduction In mergers and acquisitions agreements, the seller generally represents and warrants that the target’s financial statements for its most recent fiscal year and its most recent interim financial statements are accurate and complete, consistent with operations, and prepared in

Posted in books and records rep and warranty, financial representation and warranty Tagged with: , ,

Court Rules That EY Earnout Calculation Was Arbitration Not Expert Determination

Introduction There are often post-closing calculations that must be made in an M&A deal. Examples are working capital and earnout calculations. Often the parties agree in advance to a dispute resolution procedure in the M&A documents in the event there

Posted in arbitration vs expert determination, dispute resolution provision, earn out, earn out dispute procedure, earn outs Tagged with: , , , , ,

ESOP Bank Trustee & Owner Must Pay $6.5 Million Purchase Price Overpayment to ESOP

Introduction One exit strategy for a business owner is to sell your company to an ESOP; especially if there are no serious buyers. However, those transactions are highly regulated by the federal government and must be done right. The deal

Posted in capitalization of cash flow, discounted cash flow or DCF, independent trustee, projections, prudence, sale of business to ESOP, valuation Tagged with: , ,

Business Buyer Loses Claim for $8 Million of Nonrenewed Customer Contracts

Introduction A crucial part of a potential business buyer’s due diligence is evaluating the seller’s projections. However, those projections often do not materialize, and disappointing projections do not usually amount to a breach of the seller’s acquisition agreement representations and

Posted in customer and supplier rep, full disclosure rep, MAE rep, projections, representations and warranties Tagged with: ,

Buyer Loses Dispute with Asset Seller Over Responsibility for Deal’s Sales Tax

Introduction The language used in an M&A deal matters. In a post-closing dispute, the lawyers and judges look to the language of the M&A document to resolve the dispute. And sometimes, the language will work against what a party thought.

Posted in allocation of sales tax from transaction, asset purchase agreement Tagged with: , ,

Court Greenlights Business Seller’s Fraud Lawsuit Over Earnout Dispute

Introduction Disappointing earnout deals are common. The deal This deal involved the stock acquisition of the target, a legal analytics company by a competitor. The price was $9 million cash plus a $3 million earnout potential.  The earnout was based

Posted in anti-reliance clause, earn outs, integration clause Tagged with: ,

Court Holds That $12 Million Merger Termination Fee Payment Not Exclusive Remedy

Introduction It is common in M&A deals for the seller to have the right to terminate an agreement by paying a significant termination fee; especially as part of a fiduciary out structure. The deal This case involves players in the

Posted in exclusive remedy, fraud carveout, termination of M&A agreement, termination or breakup fee, willful breach carveout Tagged with: , , , ,

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