Page 9 - M & A Disputes
P. 9

Subsequent Events ............................................................................................................................................ 34

           Materiality ......................................................................................................................................................... 35

           Carve-Outs Not in Accordance With GAAP .................................................................................................... 36

           Common Areas of Working Capital Disputes .................................................................................................. 36


           Drafting Position Statements ............................................................................................................................ 37

           Roles for Accountants ....................................................................................................................................... 38

             Neutral Accountant or Arbitrator .................................................................................................................. 38

             Consultants .................................................................................................................................................... 38

             Trial Assistance ............................................................................................................................................. 39


        Chapter 3 — Earnout Provisions and Disputes  .............................................................................................. 40

           Introduction ....................................................................................................................................................... 40

           Mechanics of Earnout Adjustments .................................................................................................................. 40

           Earnout Adjustments — Common Issues and Key Considerations.................................................................. 42

             Management Issues ....................................................................................................................................... 42


             Revenue Versus Net Earnings Stream .......................................................................................................... 43

             Basis of Accounting to Measure the Target’s Performance ......................................................................... 44

             Bundled Product............................................................................................................................................ 45

             Recordkeeping .............................................................................................................................................. 45


             Postclosing Oversight ................................................................................................................................... 45

             Other ............................................................................................................................................................. 46

        Chapter 4 — Material Adverse Change Clauses  ............................................................................................ 47

           Definition of a MAC ......................................................................................................................................... 48


           Analyzing a MAC ............................................................................................................................................. 49

           The Significance of the Event’s Impact on the Target Company ..................................................................... 49

           Duration of the Event ........................................................................................................................................ 50

           Disproportional Impact Relative to the Industry .............................................................................................. 51




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