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Expert Analysis

A New Reason For PE Sellers To Hate Fraud Carveouts

By Glenn West (June 2, 2017, 5:11 PM EDT) -- Undefined fraud carveouts are ubiquitous in merger and acquisition agreements, and the problems they pose for private equity sellers are legion. I've previously chronicled many of these problems (together with suggested solutions) in a 2014 article in The Business Lawyer,[1] as well as in a number of blog posts.[2] But, a recent Delaware decision, EMSI Acquisition Inc. v. Contrarian Funds LLC, C.A. No. 12648-VCS (Del. Ch. May 3, 2017), provides yet another reason for private equity sellers to vigorously resist the inclusion of fraud carveouts in M&A agreements, or to carefully define them so that the potential havoc they can wreak on deal certainty can be understood and managed....

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