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Takeover Deal Hit By £3.8 Million Skeleton in the Cupboard

A company which ended up more than £3.8 million out of pocket when it uncovered an unpleasant skeleton in the cupboard following a takeover deal can take at least some comfort after the High Court awarded it half of its money back.

Company A had bought all the shares in Company B, which specialised in managing and advising upon pension schemes. The latter had subsequently been sued by one such scheme and faced claims of negligence and other wrongdoing. Company A had settled that claim for £3,850,000 and sought restitution from the seller.

The Court found that, in accordance with an indemnity clause in the sale agreement, the seller was obliged to compensate company A for that part of the loss which had arisen in the period prior to the transfer of the shares. Taking a rough and ready approach, the Court found that 50 per cent of the loss related to that period.

Company A was also entitled to recover half of the legal costs it had incurred prior to the settlement of the scheme’s claim against Company B. Judgment was therefore entered against the seller for a total of £1,958,415, plus interest.