A recent case heard by the Delaware Court of Chancery gives guidance on an acquirer’s obligations to honor contingent purchase price provisions under a merger agreement.
As per American Capital Acquisition Partners, LLC v. LPL Holdings, Inc., the implied covenant of good faith and fair dealing compels the acquirer to refrain from actively depressing a contingent purchase price payment, as explained by John Stigi and Bridget Russell of Sheppard, Mullin, Richter & Hampton. However, minus a “best efforts” clause, the acquirer is not obliged to maximize that payment either.
