We know there’s no such thing as a foolproof deal. Our M&A Practice shares its tips on successful dealmaking.
You are buying a company and are concerned about hidden liabilities, so the seller has agreed to give certain representations and warranties to address your concerns. You are, however, worried that by the time you discover a breach of these representations and warranties, the seller will no longer be required to indemnify you. Can you negotiate for these representations and warranties to survive beyond statutory limitation periods?
You are in negotiations to buy a business with little operating history. The seller is convinced the business has significant growth potential, so you agree to include an earn-out to bridge the valuation gap. As future owner, you want to run the business as you see fit. You know that how you conduct the business will affect its performance and ability to achieve earn-out targets. But as long as you don’t agree to include any performance standards in the earn-out provisions, you should be able to operate the business without any restrictions, right?
You want to buy a business and you need information about the target's customers, employees and contractors before you can make your decision. More importantly, you want to be able to use that information after the purchase has been made. But privacy laws have tightened in Canada, and transferring personal information is not so straightforward. How do you handle the information so it doesn't end up being none of your business?
You have bought a business and agreed to use "best" efforts to obtain regulatory approval of the transaction. The regulator has decided that it won't clear the deal unless you divest one of your product lines. Doing so would not make much commercial sense for your business. Are you on the hook to sell the line anyway given your "best" efforts obligation?
What happens when your order lands on your tray and it doesn’t look like you are getting what you paid for? Just as you are about to close your deal, you learn that the business you agreed to buy met only half of its projected sales forecasts for the last several quarters and its gross revenues are down almost 10%. Can you declare a “MAC” and walk away from the contract?
You signed a non-binding letter of intent. Weeks later, negotiations to finalize the deal have stalled, and you’re starting to lose interest in the transaction. Are you obliged to reach a definitive agreement even though your letter of intent says it is non-binding?
You are preparing to close an acquisition. Your due diligence shows that one of the seller’s contractual representations about the target is untrue. If you decide to close the deal anyway, can you sue the seller after closing if you suffer a loss?