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Court of Chancery Upholds Post-Closing Adjustment Clause

Posted In M&A

AHS New Mexico Holdings, Inc. v. Healthsource Inc., C.A. No. 2120-N (Del. Ch. February 2, 2007).

It is often the case that a merger agreement or sale of stock will provide for an adjustment to the closing price based on post-closing events. This decision holds that in such cases the procedures for submitting any dispute are enforceable and absent agreement of the parties will include all of their disputes over the adjustment. This later point is important because it permits the parties to reach preliminary agreements on some parts of the dispute while preserving their right to take the whole dispute to the chosen forum for resolution if all points are not resolved by negotiations.

The decision also enforced a contract provision that limited the scope of the post-closing events that might be considered in any adjustment. In effect, such a provision operated to bar as too late facts that occurred after the time limit set out in the contract. Share
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