Avoiding Oral Breach Claims Arising From M&A Discussions
Overview:
M&A negotiators typically assume that, unless and until they sign a definitive acquisition agreement, either side is free to walk away from discussions at any time. Negotiators will often sign a letter of intent in the early stages of discussions specifically stating that the parties are only discussing a possible transaction and that none of them has any obligation to try to close the deal unless they sign a formal transaction agreement. However, a March, 2010 case in Georgia demonstrates how easily such an assumption can be upended. This case, Turner Broadcasting System, Inc. v. McDavid, resulted in a damage award of $281 million against Turner Broadcasting System based on its breach of an alleged oral contract formed during the negotiation process. The jury reached this decision even though (i) no definitive agreement was ever signed, and (ii) the parties had signed a letter of intent stating that neither party would be bound unless a definitive agreement was signed. This case serves as a warning to deal practitioners to watch carefully what they say and do during negotiations.
Agenda:
Lee J. Potter, Jr., Partner,
Duane Morris LLP
- The recent Turner Broadcasting vs. McDavid case was a jolt to M&A practitioners. I will briefly describe the facts and outcome (unless another panelist wants to).
- Important drafting points to take away from the Turner holding, including
- the need to include waiver of jury trials, and
- making sure the no-oral-agreement provision survives termination.
- The importance of deal participants to be careful about loose statements in a negotiation that could be taken out of context later.
- Implications of the Turner case on other typical M&A practices (such as advance preparation of press releases).
Oscar A. David, Chair, Mergers & Acquisitions/Securities/Corporate Governance,
Winston & Strawn LLP
- Preliminary Agreements are intended to provide some comfort for both purchasers and sellers that the parties are on the same page and will achieve a transaction optimal for both sides. These agreements are not intended to bind the parties to close a transaction, but instead are intended to provide the basis for further discussions while carrying a limited number of binding provisions (confidentiality, exclusivity)
- Poor drafting of these Preliminary Agreements and improper actions by the negotiating parties can result in these Preliminary Agreements having unintended binding effects.
- Advantages and Disadvantages of the use of Preliminary Agreements
- Basic Provisions of Preliminary Agreements—Binding v. Non-binding
- Texaco v. Pennzoil
- Turner Broadcasting v. McDavid
- Practical Lessons from these cases to apply to future transactions (i.e. non-binding nature of letter of intent must survive termination)
Who Should Attend:
- M&A Investment Bankers
- M&A lawyers
- In house M&A practitioners
- Accountants
Lee J. Potter, Jr. practices in the area of corporate law with a concentration on mergers and acquisitions and private …
Oscar David is a partner and chair of Winston & Strawn’s Mergers and Acquisitions, Securities & Corporate Governance Practice. This …
Course Level:
Intermediate
Advance Preparation:
Print and review course materials
Method of Presentation:
On-demand Webcast (CLE)
Prerequisite:
NONE
Course Code:
114177
Total Credit:
1.0 CLE
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SPEAKERS' FIRMS:
About Duane Morris LLP
Website: https://www.duanemorris.com/
About Winston & Strawn LLP
Website: https://www.winston.com/