The Delaware Court of Chancery rejected a buyer’s efforts to prevent a seller from adopting a post-closing purchase price adjustment method of calculating that was inconsistent with the seller’s pre-closing accounting practices. Instead of an apples-to-apples comparison, the court interpreted the purchase contract as requiring the buyer to calculate the tangible net worth of the business in accordance with specific accounting principles, even though the seller did not has not correctly applied these principles in its pre-closing financial statements. The Golden Rule court concluded that a correct or precise application of accounting principles fell within the ordinary meaning of a provision requiring parties to calculate post-closing purchase price adjustments in accordance with specific accounting principles, unless they do so. otherwise feature in the four corners of the agreement.
Golden Rule Financial Corp. purchased USHEALTH Group Inc. for a base purchase price of $ 750 million, subject to a post-closing purchase price adjustment. The post-closing adjustment was necessary to assess certain parameters at the close, and the purchase contract established a three-step process for calculating tangible net worth. As a first step, the seller must estimate his own tangible net worth at closing. Within 90 days of closing, the buyer must prepare a separate calculation. In the event that the seller disputes the buyer’s calculation, the seller should notify the buyer in writing, and if the parties could not resolve the dispute, they should hire a third party company to calculate the tangible equity. .
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