[co-author: Melissa Bales]
Delaware Court of Chancery holds that specific accounting principles in a merger agreement will govern, even though it may result in a different approach to accounting standards for determining the target’s tangible net worth post-closing and setting the target tangible net worth at signing.
TAKEAWAYS
Specific provisions in a merger agreement regarding how to calculate the post-closing purchase price adjustments will be read in light of the entire contract, but, where specific and general provisions conflict, the specific provisions will govern.
In
Golden Rule, the court found that the plain language of the merger agreement reflected the parties’ agreement to use a particular accounting standard to finally determine the target’s tangible net worth and the resulting post-closing purchase price adjustment, even though the financial statements used by the parties at signing to determine the tangible net worth minimum, and the target’s calculation