SRS Acquiom has been a professional shareholder representative since 2007. Our data shows 2/3 of deals have material post-closing issues. As a result of our work on over 2,300 engagements as a shareholder representative, we have reduced claims made against our clients’ escrow funds by $1.6 billion–61% of the total claimed amounts. Below are just a few success stories we have compiled throughout our experience.

Working Capital Adjustments

Issue: A buyer submitted a claim asserting a $3 million working capital deficit.

Result: A working capital surplus was distributed to shareholders after we successfully argued the calculation was not consistent with the terms in the merger agreement.

Financial Statement Claims Reduced

Issue: A buyer submitted claims related to alleged over-statements of accounts receivable of more than $1.5 million.

Result: We negotiated an agreement that the buyer would not make any additional claims and would agree to an early release of the balance of the escrow fund concurrently with the favorable settlement of this claim — several months earlier than scheduled.

State Sales Tax Claims

Issue: A buyer submitted a claim for $750,000 for the company’s alleged failure to collect and remit sales taxes in various states.

Result: We researched the matter and established that the vast majority of this tax was not due. The claim was ultimately dropped in full and the escrow fund released.

Capitalization Table Issues

Issue: We identified a discrepancy between the complicated waterfall capitalization tables and the terms of the merger agreement that would have resulted in nearly $500,000 in erroneous payments.

Result: We notified the parties so they could correct the math before the escrow release and avoid major problems.

Earnout Milestones

Issue: Contemporaneously with an earnout dispute, a buyer submitted claims in excess of the escrow amount.

Result: We negotiated an amendment to the milestone provisions of the merger agreement. The claims were dropped and the escrow was released in full.

Paying Agent Issues Resolved

Issue: A board member lost his certificates representing sizable holdings. The paying agent required a bond in order to issue replacement certificates.

Result: We leveraged a strong working relationship with the paying agent to have the bond amount reduced by more than half.

International Tax Claims

Issue: A buyer submitted more than $5 million in claims related to certain tax issues and the company’s alleged failure to comply with U.S. import laws.

Result: We established that the claims were overstated and speculative because the import issues had not been raised by any governmental authority and were unlikely to ever be raised. We negotiated a settlement of these issues for a fraction of the claimed amount plus an extension of the indemnification period in the event that any of the import law issues ever came to fruition.

 

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