The definition earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA have always been important and highly negotiated pieces of credit agreements and M&A transactions. However, with the unprecedented economic impact of the COVID-19 pandemic, these financial measurements take on even greater importance as borrowers seek to maintain financial covenants in their credit agreements and prospective buyers and sellers struggle to determine whether EBITDA, if determined without an adjustment for the financial impact…

M&A Insights

Buyer’s Claim of Fraud and Fraudulent Inducement in Connection with $106 Million Purchase of Target Allowed to Proceed Due to Failed Anti-Reliance Language and Despite Bootstrapping Rule

By Nancy B. Bostic & Austin C. Carlson

July 28, 2020

The Delaware Chancery Court in The Anschutz Corporation et. al. v. Brown Robin Capital, LLC[1] ruled against dismissing several of Buyer’s claims in a dispute involving the $106 million acquisition of OnRamp Access, LLC (“Target”) by LightEdge Holdings, LLC (“Buyer”). Among other claims, Buyer alleged fraud, fraudulent inducement and breach of contract by the owners of Target (“Sellers”) due to breach of several representations and warranties in the unit purchase agreement to purchase Target…

M&A Insights

Minority Members’ Contractual Blocking Rights Can Result in the Imposition of Fiduciary Duties

By Nancy B. Bostic & Lynsey J. Hyde

July 28, 2020

fiduciary-duty-legal-responsibilities-picture-id1187312778

In Skye Mineral Investors LLC v. DXS Capital (U.S.) Limited, et al., the Delaware Court of Chancery (the “Court”) denied defendants’ motion to dismiss, finding that plaintiffs had sufficiently pled a breach by the members holding a minority equity interest (the “Minority Members”) in Skye Mineral Partners, LLC (“SMP”) and the manager who the Minority Members appointed to SMP’s board of managers (the “Minority Manager”) of their fiduciary duty of loyalty to SMP and its…

M&A Insights

IN THE NEWS: The Potential Divorce of Simon and Taubman

By Amy E. Lott & Lynsey J. Hyde

July 28, 2020

interior-modern-new-dutch-shopping-centre-hoog-catharijne-of-utrecht-picture-id1157602787

Simon Property Group, Inc. (“Simon”) wants out of a deal to acquire its competitor, Taubman Centers, Inc. (“Taubman”), due to the COVID-19 pandemic. Simon, the buyer, is an Indiana-based company that owns malls, outlets, and shopping centers. Its last 10-K filed with the Securities and Exchange Commission states that it had an interest in more than 200 properties in the United States. For example, in Texas, Simon owns The Galleria in Houston, Katy Mills, Grapevine…

M&A Insights

Email Exchange Insufficient to Create Binding Contract

By Nancy B. Bostic & Grace G. Rollinger

July 28, 2020

In Chalker Energy Partners III, LLC v. Le Norman Operating LLC,[1] the Texas Supreme Court analyzed an email exchange between the sellers’ agent and a bidder to determine if a contract had been formed. Chalker involved 18 sellers, including Chalker Energy Partners III, LLC (“Chalker”) as the sellers’ designated agent handling the auction and sale process for 70 oil and gas leases in the Texas Panhandle worth over $300 million (the “Assets”). The factual…

M&A Insights

An Illustration of Remote Controller Fiduciary Liability

By Amy E. Lott & Lynsey J. Hyde

July 28, 2020

notary-or-attorney-signs-legal-contract-picture-id1147159720

Under Delaware law, indirect controllers of a Delaware limited liability company (“LLC”) can owe limited fiduciary duties to the LLC and its members if they exert control over the LLC’s assets, unless those duties are clearly and unambiguously waived by the LLC’s operating agreement. Accordingly, where management of a Delaware LLC is vested in an entity, rather than an individual, the duties and standard of care applicable to the persons who ultimately control the LLC…

M&A Insights

Where Am I and How Did I Get Here (In This Venue)?

By Brock T. Niezgoda & Cindy M. Pridgen

July 28, 2020

oil-field-the-oil-workers-are-working-picture-id1174018800

In June 2019, David Dunwoody (“Dunwoody”) left his position as President of EnVen Energy Corporation (“EnVen”) amidst a scandal centering around his alleged involvement in a kickback scheme. Dunwoody sued EnVen, the oil exploration company that he co-founded in 2014, in Texas state court to demand that EnVen honor the benefits package that Dunwoody was entitled to upon termination of his employment agreement for “good reason.” EnVen denied that Dunwoody had “good reason” for terminating…

M&A Insights

Aiding and Abetting Claim Sustained Against M&A Advisor JPMorgan

By Nancy B. Bostic, Amy E. Lott & Cindy M. Pridgen

July 28, 2020

On June 1, the Delaware Chancery Court (the “Court”) in Morrison v. Berry allowed an aiding and abetting breach of fiduciary claim to proceed against financial advisor J.P. Morgan Securities, LLC (“JPMorgan”) for its role in the 2016 merger/takeover of grocery store chain The Fresh Market, Inc. (“Fresh Market”) by a group of Apollo entities (“Apollo”), while dismissing aiding and abetting claims against Fresh Market’s law firm and Apollo. The Court’s decision on whether…

M&A Insights

IN THE NEWS: Victoria’s Actual Secret: Negotiating Material Adverse Effect Clauses After COVID-19

By Nancy B. Bostic & Chad M. Kell

May 13, 2020

Empty pink shopping bag in the studio lighting, Design concept for valentines day.

The collapse of a recent deal between the potential buyer and seller of a prominent retail chain shines a spotlight on the need to address the COVID-19 pandemic in acquisition and merger agreements. In SP v. Buyer LP, an affiliate of Sycamore Partners (“Sycamore”), and L Brands Inc., the parent company of the Victoria’s Secret retail store chain (“L Brands”), entered into a Transaction Agreement (“Agreement”) on February 20, 2020 through which Sycamore was to purchase…

M&A Insights

IN THE NEWS: WeWork Sues Softbank Group Corp and its Vision Fund for Failed Tender Offer

By Brock T. Niezgoda & Grace G. Rollinger

May 13, 2020

modern-office-interior-with-city-view-picture-id1138024382

On October 22, 2019, The We Company (“WeWork”), SoftBank Group Corp. (“SBG”), SoftBank Vision Fund (AIV M1) L.P. (“Vision Fund”, and together with SBG, “SoftBank”) and certain other parties entered into a Master Transaction Agreement (the “MTA”), as amended on December 27, 2019. The MTA included a series of transactions, including a tender offer, pursuant to which SoftBank would purchase up to $3 billion worth of WeWork stock (the “Tender Offer”) subject to the satisfaction…

M&A Insights

Perspectives on M&A from Gray Reed’s Mergers and Acquisitions/Private Equity Practice

Blog Authors

EBITDA, Adjusted EBITDA, and EBITDAC in the Age of COVID-19

Buyer’s Claim of Fraud and Fraudulent Inducement in Connection with $106 Million Purchase of Target Allowed to Proceed Due to Failed Anti-Reliance Language and Despite Bootstrapping Rule

Minority Members’ Contractual Blocking Rights Can Result in the Imposition of Fiduciary Duties

IN THE NEWS: The Potential Divorce of Simon and Taubman

Email Exchange Insufficient to Create Binding Contract

An Illustration of Remote Controller Fiduciary Liability

Where Am I and How Did I Get Here (In This Venue)?

Aiding and Abetting Claim Sustained Against M&A Advisor JPMorgan

IN THE NEWS: Victoria’s Actual Secret: Negotiating Material Adverse Effect Clauses After COVID-19

IN THE NEWS: WeWork Sues Softbank Group Corp and its Vision Fund for Failed Tender Offer

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