Explore the intricate world of M&A in our latest blog, where we delve into buyer risk mitigation and seller liability management in asset acquisitions. Join us as we dissect real cases, like the recent dispute over undisclosed software fees in a New York landscape architecture firm acquisition. Gain insights into due diligence, contractual obligations, and litigation strategies from legal experts. Stay ahead in the dynamic M&A landscape.
M&A Stories
April 29, 2024
In the realm of M&A, buyers often navigate the terrain of acquiring businesses with specific seller liabilities, a strategic move that demands precision.
Consider a recent deal involving the acquisition of assets from a New York landscape architecture firm. The buyer opted to inherit select seller contracts with customers, while withholding $225K of the purchase price for a year, anticipating potential budget overruns on these contracts.
Post-closure, the buyer contested releasing the holdback funds to the seller, citing substantial undisclosed software license and user fees. The dispute escalated to a New York state trial court.
The seller’s defense rested on the argument that undisclosed software fees did not constitute budget overruns, the provision intended solely for customer contracts where labor costs exceeded agreed-upon budgets.
The court sided with the seller, dismissing the claim. Additionally, the buyer’s failure to promptly notify the seller of the claim, as mandated by the asset purchase agreement, further weakened their position.
The takeaway for prospective buyers is clear: comprehensive disclosure within the purchase agreement regarding software fees could have served as grounds for breach of representations and warranties.
Case Reference: Thayer v. Paulus, Sokolowski & Sartor, LLC. Index No. 652747/2023., Supreme Court, New York County, (Decided March 12, 2024).
Thank you for reading this blog. If you have any questions, insights, or if you’d like to engage in a more detailed discussion on this matter, I invite you to reach out directly.
Feel free to send me an email. I value thoughtful discussions and am always open to connecting with business owners management, as well as professionals who share an interest in the complexities of M&A law.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Podcasts https://www.buzzsprout.com/2142689/12339043
Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
Legal Disclaimer
The blogs on this website are provided as a resource for general information for the public. The information on these web pages is not intended to serve as legal advice or as a guarantee, warranty or prediction regarding the outcome of any particular legal matter. The information on these web pages is subject to change at any time and may be incomplete and/or may contain errors. You should not rely on these pages without first consulting a qualified attorney.
Recent Comments