Dive into the legal intricacies of M&A transactions with our latest blog post, exploring how to mitigate risks associated with former seller employees competing with stolen trade secrets. Learn from real-life legal disputes and discover proactive measures for safeguarding your acquisitions. Stay informed on the latest in M&A legal practices and protect your business assets effectively. #M&A #LegalRisks #TradeSecrets #DueDiligence #IntellectualProperty
M&A Stories
March 26, 2024
In the realm of mergers and acquisitions, the acquisition of a manufacturing business brings forth a plethora of opportunities and risks, particularly concerning the protection of trade secrets and confidential information. A recent case highlights the significance of vigilance in safeguarding these assets to mitigate potential pitfalls for buyers.
In April 2018, a buyer ventured into the acquisition of the assets of a quaint valve maker nestled in small-town Oklahoma. Following the transaction, the seller’s longstanding general manager transitioned to the buyer’s workforce. However, this seemingly routine transition soon unraveled into a legal conundrum.
The grandson of the seller’s owner embarked on the establishment of a competing entity, subsequently recruiting the aforementioned general manager. This triggered a legal dispute, with the buyer initiating legal action in an Oklahoma City federal district court, alleging the misappropriation of the valve maker’s trade secrets and confidential information.
The laundry list of allegedly pilfered assets included a gamut of crucial documents and data, ranging from quality manuals and technical specifications to customer lists and pricing information. The gravity of the situation underscored the buyer’s imperative to protect its intellectual property and proprietary information.
Despite challenges raised by the general manager, the court greenlit the lawsuit, particularly emphasizing the validity of claims pertaining to trade secrets and confidential information. Notably, the court discerned that while certain assets may not qualify as trade secrets, they remain eligible for protection as confidential information, reinforcing the need for robust safeguards in M&A transactions.
This cautionary tale serves as a poignant reminder for entrepreneurs, business owners, CFOs, CEOs, board members, and professionals involved in M&A transactions. Vigilance in protecting trade secrets and confidential information is paramount, underscoring the necessity for meticulous due diligence and proactive measures to mitigate risks and uphold the integrity of acquisitions.
Case Reference:
Aceco Valves, LLC v. Neal, Case No. CIV-21-368-D, United States District Court, W.D. Oklahoma, (January 23, 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
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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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