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Buyer Accuses Timeshare Business Seller of Signing Credit Risk Members Before Closing

Delaware Court denies seller’s motion to dismiss buyer’s claims that seller changed practice before closing by signing up customers with low FICO scores.   M&A Stories    April 13, 2021   Introduction   A buyer uses past performance and future projections to help price a target business. The

Posted in exclusive remedy, fraud carveout, fraud in business sale, fraudulent inducement Tagged with: ,

SEC Sues Target Officers for Fraud, Seeking Millions of Dollars in Damages

SEC accuses Target’s CEO and CTO of lying to the buyer about owning a game changing product and overstating the target backlog in pipeline. M&A Stories Taking the high road in M&A negotiations is good business: “It’s a rough road

Posted in fraud in business sale Tagged with: ,

Buyer Can Sue Seller of Business in Delaware for Fraud in “As Is” Deal

M&A Stories December 15, 2020 Introduction A buyer of a business usually manages unknown M&A risks by requiring the seller to provide a comprehensive set of representatives and warranties about the business. But occasionally, the buyer agrees to an “as

Posted in "as is where is", fraud in business sale Tagged with: ,

Buyer Can’t Sue Seller for Not Telling Buyer About Pending Loss of Major Customer

M&A Stories December 10, 2020 Introduction It is very important for a prospective buyer of a business to do smart due diligence to validate the purchase price. However, there is always a risk that the seller won’t tell you the

Posted in contracts, due diligence, extra-contractual fraud, fraud in business sale, non-reliance clause Tagged with: ,

No Buyer Management Fraud for Seller’s Inaccurate Projections

May 31, 2020 Introduction It is all too common for an acquired business to not perform as well as expected after the closing. But the fact that the target’s projections were inaccurate do not amount to a fraud claim. The

Posted in constructive fraud, federal securities fraud, fraud in business sale Tagged with: , ,

Owner Loses $14.5 Million Fraud Claim Against Majority Shareholder in Stock Deal

May 22, 2020 Introduction This deal is a reminder that a seller of a business needs to read the transactional documents (with the help of a competent lawyer) before signing. In this case it cost the seller $14.5 million. The

Posted in fraud in business sale, fraudulent inducement, shareholder release Tagged with: , ,

Court Says Asset Business Buyer Can Sue the Seller’s owner for Fraud

January 20, 2020 Introduction “Things gained through unjust fraud are never secure.” Sophocles The deal The seller’s owner operated a business that helped clients obtain wholesale automobile dealership licenses for auto dealerships in Missouri through seller a limited liability company.

Posted in fraud in business sale 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: ,

Trust but Verify-Business Seller Failed to Verify Accuracy of Earnout Statement

Introduction A buyer and seller of a business often use an earnout when they can’t agree upon a purchase price. In that case, the purchase agreement provides for a buyer calculation of the earnout amount, along with an earnout dispute

Posted in earn out, earn out dispute procedure, economic loss doctrine, fraud in business sale, fraud in the inducement exception Tagged with: , , , , , ,

Bootstrapping Doctrine No Bar to Business Buyer’s Fraud Claim

Introduction A buyer of a closely held business often has limited recourse against a seller if the deal turns out bad.  Even if fraud is involved, the buyer must run the gauntlet of indemnification cap, survival period, exclusive remedy, non-reliance,

Posted in bootstrapping doctrine, exclusive remedy, fraud carveout, fraud in business sale, non-reliance clause Tagged with:

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