Preparing for a merger or acquisition takes a significant amount of time, effort and possibly even financial investment, not to mention the amount of internal restructuring that is necessary when you are about to welcome a significant amount of new employees and new operations into your organization.
It stands to reason, then, that you might feel entitled to compensation if a seller backs out of an agreed-upon merger or acquisition at the last minute. By understanding the legal options available to you, there will be little confusion as to what you can do to recoup the losses of a failed M&A.
Pursue a termination fee
Corporate Financial Insitute defines a termination fee, or breakup fee, as a penalty paid in M&A transactions if the seller backs out of the deal. Termination fees typically amount to approximately 1%-3% of the deal’s total value, and the seller agrees to this outlined amount upon signing a contractual agreement to merge with the buyer. As the buyer, you have the right to pursue this termination fee if the seller backs out of the deal for any reason or if the seller receives bids from other potential buyers.
Take the matter to court
If a seller backs out of a merger or acquisition and refuses to pay the agreed-upon termination fee, even if they believe they are exempt from that fee, then it may be necessary to take litigative measures. Taking the matter to court will ensure that the full extent of the law applies to your business dispute.
While an entity you are attempting to purchase may have the right to withdraw from a merger or acquisition, that does not mean you will not receive compensation for your time. Taking steps to understand the commercial litigation process can ensure you receive what you deserve.