Why do you think Digion wants to buy Immersive?
They want to buy immersive for various reasons – the most notable are the interest in Alexander and Maria who bring years of experience. This can be helpful to have them on the team as well as have access to their technology to develop particular aspects of their company, such as helping their game developers. They would also be keen to have this new, popular start-up tech company on their team as opposed to being one of their competitors.
How would you advise Elena handle the situation with Tristan?
I would advise Elena to ensure that Tristan signs a non-solicitation agreement so that if his employment is terminated while the target is being acquired, he cannot therefore convince other employees of the company to join him, if he decides to set up a competing firm. A confidentiality clause is also advisable to ensure that any confidential information that can be useful to competitors will not be disclosed by Tristan.
I would also advise that there be a preliminary search of the IP rights of the target, in case any issues arise from transferring the IP rights upon purchase. This would be done in the due diligence part of the process. There should be an extensive list of the IP rights and documentation that the buyer will be acquiring and a clause should be added in the contract so that the seller ensures that liability falls on them in case issues do arise and the buyer cannot acquire certain rights due to any restrictions. This search should also reveal whether the Immersive is already infringing on rights or if there is any ongoing litigation due to IP rights.
What is the purpose of Clause 5 in Document 3?
Conditions in an agreement set out the conditions to be met by the seller in order for the acquisition to proceed. If one of the conditions are breached, this gives rise to the buyer’s rights to terminate the contract or not follow through with the acquisition. It allows the seller to distinguish the scope and situation of their offer and it gives the buyer certainty on what the scope and situation of their purchase will be. For example, the condition that the seller must not be in or anticipating litigation allows the buyer certainty that they will not acquire any litigation or conflicts that will give rise to litigation upon purchase.
The material adverse change clause for exmaple ensures the buyer that no changes in duration of the acquisition process will materially affect the business they are purchasing.
In Clause 7, note the phrase, 'The Seller’s liability under the warranties and indemnities shall be subject to limitations.' Suppose you were the lawyers acting for the Seller, what could you do to limit the Seller's liabilities? Why is this important?
The Seller’s lawyers should limit their liability to only what the Seller is aware or made aware of. It’s important to limit the scope and ensure that they are not liable for what the seller is not aware of or ‘should be deemed’ aware of in case judges in potential litigation may impose this interpretation. Without these limitations, it can allow the buyer to terminate or claim for damages from the Seller any issues that the Seller may not even be aware of.
A time limit should also be in place for any liability to ensure that any changes or issues that the Seller cannot reasonably anticipate nor have known, if it were not for a change in the market or a specific timeframe, will not give rise to liability for the Seller.
Why could it be important to Digion that 'the courts of England have exclusive jurisdiction to settle any dispute'?
Digion’s headquarters are based in London and therefore would want any litigation to be subject to and rely on the law in England for certainty and protection. Immersive is based in Frankfurt which may allow flexibility to certain laws and regulations that England may not, if legal disputes were to arise outside of the UK.
