Commercial/Legal Remedies Thread for Case Studies)

[SLKEJRWOI97]

Hi all!

I wanted to create a thread on the different types of commercial/legal remedies that can be used during a case study. As many of you know, you're encouraged to not only identify risks/issues but also offer solutions too. It can be quite overwhelming so I thought I'd create a thread as to what commercial/legal remedies you could offer in a case study.

I'll add some shortly but all are welcome to contribute!

Looking forward to reading your answers

 

[Commerciallaw]

^^ Any advice on this from pros? 🤣 I think the most basic thing I am thinking of (well of course it depends on the risks and the matter at hand), is negotiating better contractual terms or including specific terms in contracts to reallocate risks i.e. warranties, indemnities, representations.

 

[futuretraineesolicitor]

^^ Any advice on this from pros? 🤣 I think the most basic thing I am thinking of (well of course it depends on the risks and the matter at hand), is negotiating better contractual terms or including specific terms in contracts to reallocate risks i.e. warranties, indemnities, representations.

In terms of other ways of allocating responsibilities, I can think of two more, @AvniD @George Maxwell @James Carrabino, please correct me if I'm wrong here. One would be transferring a certain amount of money in an escrow account, so if you've identified a particular thing that could cause harm after acquiring the company (let's say an environmental issue or a lawsuit filed by an employee who could totally file another suit in future or could prompt other employees to sue on a different ground), you could try and quantify it - give it a monetary value- say 1 million GBP and then accordingly, ask the seller to put that money in an escrow account. If that particular event materialises, the buyer could turn to the escrow account and use that money. If that particular event doesn't materialise, the seller could have his money back.

Another would be a purchase price reduction. For example, if you had agreed on a certain sum to buy the other company (say 5 million dollars ), and suddenly during due-diligencing the affairs of the target company, you spot something bad that could cause harm in future, you could talk to the seller and tell him that you'd like to reconsider the purchase price and offer him 4 million dollars instead of the 5 million.

I just know of these two, would love to know more about other ways if there are any.

Also, I'm confused between the escrow and the purchase price reduction method- basically, when to do which?


Thanks.

 

[IceFloe]

This is such a good idea! I'll add post-closing adjustments as a potential legal solution.

If there's a potential for a significant delay between the signing and closing of a deal (for example if regulatory approval for the deal is needed), then post-closing adjustments may be a good solution to ensure that the purchase price reflects the most up-to-date financial statements of the Target.

 

[Deleted member 19327]

In terms of other ways of allocating responsibilities, I can think of two more, @AvniD @George Maxwell @James Carrabino, please correct me if I'm wrong here. One would be transferring a certain amount of money in an escrow account, so if you've identified a particular thing that could cause harm after acquiring the company (let's say an environmental issue or a lawsuit filed by an employee who could totally file another suit in future or could prompt other employees to sue on a different ground), you could try and quantify it - give it a monetary value- say 1 million GBP and then accordingly, ask the seller to put that money in an escrow account. If that particular event materialises, the buyer could turn to the escrow account and use that money. If that particular event doesn't materialise, the seller could have his money back.

Another would be a purchase price reduction. For example, if you had agreed on a certain sum to buy the other company (say 5 million dollars ), and suddenly during due-diligencing the affairs of the target company, you spot something bad that could cause harm in future, you could talk to the seller and tell him that you'd like to reconsider the purchase price and offer him 4 million dollars instead of the 5 million.

I just know of these two, would love to know more about other ways if there are any.

Also, I'm confused between the escrow and the purchase price reduction method- basically, when to do which?


Thanks.

I don't think they're alternatives to each other. Escrow is almost always nice to have because it's much easier for you to enforce, as opposed to getting money out of their pockets. Purchase price reduction is just something you wanna consider when negotiating the deal. Do let me know if I'm wrong x