The Dangers of Undefined Fraud Carve-Outs and “Inelegant Drafting”

October 02, 2017

Crucial to any private equity seller is certainty: the certainty that a sale will be consummated at an agreed price and that any potential post-closing liability is fully understood in advance of distributing proceeds to limited partners. The recent Delaware decision, EMSI Acquisition Inc. v. Contrarian Funds LLC, C.A. No. 12648-VCS (Del. Ch. May 3, 2017) underscores how an imprecisely drafted fraud carve-out can strip private equity sellers of this certainty and open the door to long, costly and unpredictable legal battles.

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