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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: , , , ,

Insolvent Nonprofit Hospital’s 363(f) Sale Was Free of a $305 Million Cost Imposed by CA AG

Introduction The sale of the assets of a nonprofit hospital in California requires the permission of the state’s attorney general. The deal This deal involves the Bankruptcy Code Section 363(f) sale of four California nonprofit hospitals in bankruptcy for $610

Posted in bankruptcy sale, distressed business acquisitions, Section 363 sale, state approval of nonprofit hospital Tagged with: , ,

Buyer to Indemnify Business Seller for 3rd Party Asbestos Claim Punitive Damages

Introduction Liability for asbestos claims is a common risk with manufacturing companies. Sophisticated buyers and sellers of manufacturing businesses are aware of the risk and usually manage it through an allocation between the buyer and the seller in the acquisition

Posted in asbestos claims, indemnification, punitive damages Tagged with: , ,

Business Buyer’s Suit Against Seller is Hampered by Missing Due Diligence Binder

Introduction Buying a company has many legal risks for a buyer. One of the most important tools to manage the risks of buying a business is to conduct a thorough due diligence investigation of the company. The deal This case

Posted in preservation of due diligence materials Tagged with: , , ,

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