Explore the complexities of auto dealership transactions, using the case of Foundation Auto Holdings, LLC v. Weber Motors, Fresno, Inc. Learn valuable lessons from this M&A story involving BMW, Audi, and Porsche brands. Uncover the legal actions, key findings, and implications for navigating similar situations.
M&A Stories
November 13, 2023
Introduction: Auto dealership transactions, especially those involving brands like BMW, Audi, and Porsche, often face complexities, necessitating approval from automakers and state entities. The closing process, typically months after signing the purchase agreement, allows time for necessary approvals. However, what happens when approvals don’t materialize?
Background: In a recent case involving the sale of a Fresno-based BMW, Audi, and Porsche dealership, parties signed an asset purchase agreement (APA) on November 30, 2020. The agreement included a termination right if the closing didn’t occur by June 29, 2021, through no fault of the terminating party.
Controversy: The buyer claimed the seller obstructed the transaction by being uncooperative, causing delays. Allegedly, the seller expressed unwillingness to proceed, citing concerns about the buyer’s ability to close due to existing financial issues. Despite getting close to obtaining all three manufacturer approvals, the buyer faced resistance in finalizing crucial documents. And the seller notified the buyer on June 11, 2021, that the seller had terminated the APA.
Legal Actions: In response, the buyer sued the seller for breaching the APA by attempting premature termination. The seller’s motion to dismiss was denied by the Bakersfield federal district court, rejecting technical arguments.
Key Findings: The court emphasized that the seller couldn’t terminate the APA before the June 29, 2021, closing deadline. The attempted termination on June 11, 2021, was deemed premature.
Implications: Waiting until after the deadline wouldn’t shield the seller, as the buyer could argue that the failure to close resulted from the seller’s lack of cooperation in obtaining automaker approvals.
Foundation Auto Holdings, LLC v. Weber Motors, Fresno, Inc., Case No. 1:21-cv-00970 JLT EPG United States District Court, E.D. California (October 24, 2023).
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
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