In an article published in ALM’s Corporate Counsel, corporate partner Shannon Zollo commented on Facebook’s M&A due diligence ahead of its approximately $2 billion acquisition of virtual reality developer Oculus VR. Video game creator ZeniMax Media Inc. sued Oculus, and Facebook once it purchased Oculus, on several allegations, including copyright infringement. In the trial, Facebook’s CEO Mark Zuckerberg was questioned about whether the one weekend his company was given to perform due diligence was enough time.
Shannon notes that “as a general rule, due diligence under normal conditions can take at least a few weeks, if not a few months”, and that proper due diligence could be difficult to conduct under such a short time frame, especially when intellectual property is a key component of the deal. Jury deliberations have begun in the trial.
For further detail on the case and on Shannon’s comments on due diligence, read the full article.
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Tips for Enforcing Indemnification Provisions – John J. Tumilty and Joseph C. Marrow
Your company has completed an acquisition of a strategic partner for a purchase price of $40 million. In the representations and warranties in the acquisition agreement, the seller informed you that its financial statements were true and correct as of the date of the closing. Post-transaction you discover that the financial statements, as presented, were inaccurate and misleading. What recourse do you have?
Read our tips on determining whether or not to make an indemnification claim.
Permanent Exclusion of Gain on Sales of Qualified Small Business Stock – Robert M. Finkel
Holders of certain qualified small business stock (QSBS) can permanently exclude 100% of up to $10 million of gain realized on the sale of QSBS. The benefit, provided for under Section 1202 of the Internal Revenue Code, was recently made permanent as part of the Protecting Americans from Tax Hikes Act (PATH) in December 2015. Entrepreneurs and investors will, of course want to consider the QSBS benefit when structuring investments; but QSBS benefits are sure to be an important consideration for both buyers and sellers when evaluating the economics of an exit transaction.
IP Due Diligence: Patentability vs. Patent Infringement – Sean D. Detweiler
M&A transactions often require IP due diligence investigations when technology is involved, and it can be critically important to understand issues like what technology is owned by a company, what technological developments are in the pipeline that can be protected with patents, and whether the company has freedom-to-operate by making and selling their current or planned goods and services without infringing another’s patent rights. Understanding the difference between patentability and patent infringement is important to understanding the overall IP position.