Dive into the realm of M&A legal intricacies with our latest blog post, ‘Legal Clash: M&A Buyer and Seller Tangle in Federal Court Over Post-Closing Payment Dispute.’ Explore the nuances of acquisition agreements, post-closing conflicts, and federal court litigation as we dissect a real-life legal battle between an M&A buyer and seller. Uncover the importance of precise legal drafting and the impact of ambiguous contract terms in navigating buyer-seller disputes. Stay informed and empowered in the world of M&A law with our insightful analysis and case studies.
M&A Stories
May 15, 2024
In the intricate world of mergers and acquisitions, the devil often lurks in the details of the acquisition documents. A recent legal skirmish between an M&A buyer and seller underscores the importance of precision in drafting to mitigate the risk of post-closing conflicts.
In 2017, a prominent Virginia-based IT staffing firm made an acquisition move, snapping up the assets of a smaller Boston-based cybersecurity staffing agency. The crux of the acquisition lay in the seller’s prized possessions: staffing agreements with clients and employment contracts with cybersecurity consultants engaged in client projects.
At the close of the deal, a nominal sum of $5,000 changed hands, with an agreement in place for the buyer to share profits from client contracts. This profit-sharing arrangement was contingent upon the continued service of consultants now under the buyer’s employ.
Smooth sailing ensued for six years, until a snag emerged. With just one client contract remaining, the buyer sought to either buy out the profit-sharing agreement or terminate the deal altogether.
Refusing to budge, the seller initiated legal action, seeking to prevent the termination of the arrangement. The dispute found its way to a federal district court in Boston, where the buyer sought dismissal of the lawsuit, citing the purchase agreement’s selection of Florida law, which deems contracts without a fixed term as terminable at will.
However, the court ruled against the buyer’s motion, deeming the contract ambiguous regarding termination clauses. Consequently, further litigation was deemed necessary to resolve the ambiguity.
This protracted legal battle could likely have been averted with clearer language in the purchase agreement, explicitly stating that the profit-sharing provision was not subject to termination at will.
Case Reference: Aiello v. Signature Commercial Solutions, Inc. Civil Action No. 23-cv-11930-ADB., United States District Court, D. Massachusetts, (March 25, 2024).
Thank you for reading this blog. If you have any questions, insights, or if you’d like to engage in a more detailed discussion on this matter, I invite you to reach out directly.
Feel free to send me an email. I value thoughtful discussions and am always open to connecting with business owners management, as well as professionals who share an interest in the complexities of M&A law.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Podcasts https://www.buzzsprout.com/2142689/12339043
Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
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