Seller Breached Terms of Merger Agreement Including That Statements Were GAAP-Compliant—Expert’s GPCM Accepted

BVLaw
Court Case Digests
August 2, 2023

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5045 Computers and Computer Peripheral Equipment and Software, 7374 Computer Processing and Data Preparation and Processing Services
518210 Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services
contract
damages, breach of contract, cash flow, fraud, merger, projections, generally accepted accounting principles (GAAP), purchase price, guideline public company method (GPCM)
NetApp, Inc. v. Cinelli
2023 Del. Ch. LEXIS 220; 2023 WL 4925910
US
State Court
Delaware
Court of Chancery
Gary Kleinrichert; George S. Hickey; Ann H. Hughes
Lori W. Will

Summary

The defendant hid improper recording of revenue from use of internal software in unaudited financial statements that were represented to be GAAP-compliant. The defendant was held to have breached the merger/sale contract in a manner that resulted in fraud. The plaintiff was awarded damages. The court accepted the expert’s GPCM as the most “responsible estimate” of the private company’s value as it was presented to the plaintiff.

See Also

NetApp, Inc. v. Cinelli

Full Text of Court Cases
August 2, 2023

The defendant hid improper recording of revenue from use of internal software in unaudited financial statements that were represented to be GAAP-compliant. The defendant was held to have breached the merger/sale contract in a manner that resulted in fraud. The plaintiff was awarded damages. The court accepted the expert’s GPCM as the most “responsible estimate” of the private company’s value as it was presented to the plaintiff.

This article also appears in:
Business Valuation UpdateVol. 29 No. 10