“A bad agreement is better than a good lawsuit,” as the maxim goes, bears more than a kernel of wisdom. SRS Acquiom has found that this is particularly apt when a company embroiled in litigation is acquired. But litigation cannot always be settled on command. When settlement is not feasible, the buyer and seller must carefully negotiate the indemnification parameters, who controls the litigation, and how the “scheduled litigation” against a third party is to be managed (so called because the litigation normally appears as a specifically indemnifiable matter in a schedule to the definitive agreement). The common thread is that both buyers and sellers should perform due diligence to determine the scheduled litigation’s potential costs and liabilities, and then work closely together after closing to minimize the potential for disputes.
Active litigation, when present, is often the single most significant indemnity issue when a company is acquired. This paper explores how buyers and sellers can best avoid typical post-closing disputes with strategies and deal terms that may help your next M&A deal ward off challenges with potential scheduled litigation. Topics covered include:
- Settle Before Closing – Even on Less-than-ideal Terms
- Who Controls the Litigation?
- Consider a Dedicated Escrow
- Identify Counsel and Settlement Amount “Deemed Reasonable”
- Set a Cap & Floor, and Share Losses
- Transparency and Cooperation Are Key
Download the white paper below.