Sharing Economic Benefits as a Way of Accomplishing Objective

Client

The prospective purchaser of a business organization.

Challenge

The Seller of the business faced substantial withdrawal liability from a multi-employer pension plan unless the Buyer assumed the Seller’s contribution obligation for a specified time. The Buyer initially was unwilling to make a contractual commitment to that effect because of the uncertainties of future business conditions, although in the absence of unexpected business adversity, it expected to maintain at least the same level of plan contributions as had the Seller.

Schwartz Cooper Solution

Schwartz Cooper suggested that the Seller agree to share a portion of the savings that it would realize from avoiding the withdrawal liability if the Buyer assumed the Seller’s contribution obligations. Given the additional inducement of the Seller’s payment coupled with the Buyer’s expectation that it would continue the workforce at then existing levels, the Buyer assumed the Seller’s contribution obligations.

Schwartz Cooper assisted in the performance of the due diligence for the business, prepared the purchase agreement, negotiated the Buyer’s financing and represented the Buyer in connection with the acquisition.

The Buyer’s business prospered and it increased its workforce over time. The additional money it received from the Seller truly was “found money” because the contribution level would have continued at prior levels even without the payment.