Will Sonoran Put the M&A Market in the Desert?

September 2010Articles Western Pennsylvania ACCA Chapter: Focus

In a recent case sending shudders through the M&A bar, the United States Court of Appeals for the First Circuit has held that an acquirer of a distressed business owed the seller an implied covenant to make reasonably competent and diligent efforts to develop, market and sell the seller’s products following the acquisition despite the absence of any express warranty or covenant in the acquisition agreement obligating the buyer in this regard. The implications of the case of Sonoran Scanners, Inc. v. PerkinElmer, Inc. on M&A practitioners and on the M&A market generally are difficult to predict. If the case is followed widely, clearly the bar will have been lowered for seller-initiated lawsuits to withstand summary judgment motions without any need to prove bad faith on the part of the buyer.

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