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Critical Issues in Entertainment M&A Due Diligence

May 31, 2013

 

For bidders and their counsel contemplating an M&A deal, last year’s Delaware Supreme Court decision in RAA Management LLC vs. Savage Sport Holdings, Inc. highlights the importance of assessing risk early in the due diligence process. In RAA, the bidder sought to recover its due diligence expenses, claiming that the target company knowingly included false statements in its due diligence disclosures. The court, however, affirmed the dismissal of the bidder’s complaint, holding that the nonreliance and waiver clause in the parties’ nondisclosure agreement (NDA) barred the bidder from recovering its expenses—even where the disclosures were allegedly false. RAA confirms the enforceability of nonreliance provisions even in extreme circumstances, crystallizing the importance of a bidder’s strategic due diligence plan at the outset to expose any discrepancies, misunderstandings, or miscalculations as it refines its evaluation of the target. This planning is particularly crucial in the entertainment, sports, and media (ESM) space, as the bidder’s in-house counsel must navigate a complex industry in which the key business and legal issues are not always apparent.

O’Melveny Partner Sean Monroe has authored an article, recently published by Corporate Counsel magazine, detailing certain key diligence issues that bidders’ counsel should consider at the outset of any ESM M&A transaction. The article can be found here.

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This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Sean Monroe, an O'Melveny partner licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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