Explore the potential liabilities faced by M&A buyer’s owners in a recent dispute with a deal facilitator. This case sheds light on the repercussions of reneging on agreed interests and emphasizes the importance of owner actions in investment deals. Stay informed on legal insights in M&A transactions.
M&A Stories
September 11, 2018
A recent case involving a family-owned beer brewery in Morganton, North Carolina, sheds light on potential liabilities for owners in M&A deals. In early 2017, a deal facilitator proposed and orchestrated the sale of another family-owned brewery in Charleston, South Carolina, to the buyer.
Allegations include the buyer’s owners promising the deal facilitator a 15% stake in the buyer for $3,500,000 and a post-sale consulting agreement with a salary ranging from $60,000-$80,000. Despite the deal facilitator’s active role in negotiating and securing financing, the buyer’s owners reneged on the agreed interest after the $9 million asset purchase on December 29, 2017.
The deal facilitator filed a lawsuit on May 3, 2018, in a Charleston federal district court, prompting the buyer’s owners to seek dismissal, arguing that the dispute is with the buyer, not them. The court, applying South Carolina law, acknowledged that owners are not automatically liable but emphasized their potential liability if proven to have caused the buyer’s withdrawal.
In the referenced case of Scott v. Catawba Valley Brewing Company, the court found that the actions of the buyer’s owners, as presented by the deal facilitator, sufficiently alleged their involvement in the decision to back out of the investment deal.
This case serves as a reminder that while corporate structures aim to protect personal assets, shareholder, officer, or director actions can expose them to personal liability. Business owners should be mindful of their involvement in decisions that may impact the corporation and its commitments.
Case Reference:
Scott v. Catawba Valley Brewing Company, Case No. 2:18-cv-1539-RMG, United States District Court, South Carolina, Charleston Division (August 17, 2018). https://scholar.google.com/scholar_case?case=12086472352635923982&q=%22stock+purchase+agreement%22&hl=en&scisbd=2&as_sdt=2006&as_ylo=2017
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