Mergers and acquisitions are complex business transactions that require foresight, careful planning and a bit of luck. There is wide range of things to consider such as financial ramifications, the meshing of corporate cultures and even intellectual property concerns or real estate issues. With so many variables at play, it’s a very real possibility that potential mergers can fall though and a business dispute can emerge. During a merger or acquisition, when the stakes are high, the results of even a single quarterly report can spell doom for the transaction. Such is the case with the merger between Pep Boys and Gores Group.
Pep Boys, the national auto parts chain with several stores in Louisiana, agreed to terminate a proposed $1 billion merger with Gores Group. The merger was initiated when Gores Group, a private-equity firm, established that it would buy Pep Boys. Following the disclosure of Pep Boys’ quarterly results, however, the Gores Group asked Pep Boys to delay a shareholder meeting while they considered the ramifications of the merger given the new report, which fell behind analyst approximations.
Subsequently, the Gores Group and Pep Boys agreed to terminate the proposed merger, with Gores Group paying Pep Boys a $50 million fee and reimbursing any legal costs associated with the merger.
Pep Boys plans to continue on, regardless of the inconveniences that may have led to their recent difficulty. However, according to the CEO, the company’s financial position is still strong, and it will venture ahead as planned.
In such large and complex mergers, business disputes are often inevitable. In the event of a disagreement, it is important to be represented by a legal advocate who is well versed in the law of business transactions. A company’s livelihood is often on the line.
Source: Los Angeles Times, “Pep Boys ends proposed $1-billion merger with Gores Group,” May 30, 2012