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M&A Agreements: Seller’s Breach of Capitalization Rep Gives Buyer Right to Walk
DealLawyers – While most reps & warranties in an acquisition agreement are subject to materiality or “material adverse effect” qualifiers, not all of them are. Most agreements provide a buyer will have the right to walk away if certain seller reps are not true and correct in all respects. The seller’s rep as to its capitalization is usually one of these unqualified reps. A recent Delaware Chancery Court decision held that an unqualified capitalization rep means what it says, and that the buyer was entitled to walk away from an acquisition in case of a seller’s uncured breach of that rep.