SUMMER 2019

158
THE DISTRIBUTOR’S LINK
ROMAN BASI NTRICACIES WITHIN AN M&A TRANSACTION: OVERLOOKED ISSUES THAT COULD DELAY CLOSING from page 76
A basket (sometimes called a deductible) is a
threshold amount of losses and damages the buyer must
incur before it is entitled to any indemnification from the
Seller. Once the buyer has incurred losses equal to the
agreed amount, the buyer is entitled to full recovery of
all losses beginning from the first dollar of loss, this is
known generally as the “first-dollar method.” For example,
under the first-dollar method, if the basket is $300,000
then any claim up to $300,000 would not be paid.
However, if a claim exceeds $300,000 and is $301,000
due to a Seller’s inaccurate representation or warranty,
the entire $301,000 amount would be paid to the buyer.
The example exhibits the importance of understanding
the necessity of a basket and cap for both the buyer and
seller.
A final issue for both the buyer and seller to be
aware of is the WARN Act criteria. The WARN Act requires
employers with 100 or more full time employees to provide
at least 60 calendar days advance written notice of a plant
closing or massive layoff affecting 50 or more employees
at a site of employment. While there are exceptions like
unforeseeable circumstances, faltering companies, and
natural disasters, an M&A transaction does not always fall
under such exceptions. The WARN Act not only affects the
Seller but the buyer as well as the Eighth Circuit in 2016
in Day v. Celedon Trucking Servs., Inc., held a buyer of a
business liable to the seller’s employees under the WARN
Act as the buyer did not make offers of employment to the
employees, despite provisions in the purchase agreement
that placed all WARN Act liability on the seller. As you can
see the WARN Act is two-fold as it requires the seller to
meet criteria of timely notice to employees that conforms
with the date of closing, while restricting buyers from
contracting away liabilities to the seller.
These are only three of many various issues that
ascend during an M&A transaction. It is important to
understand the intricate details and issues that help put
your company in the best position to prosper.
ROMAN BASI
FAB GROUP RUETZ FOR RUETZ AT AIS, MSC, AND FAB GROUP from page 78
As they reflect on their experiences, they cite the
Fastener Advisory Board, also known as “The FAB Group”
as a key peer-partner in providing executive insight
to these transitions. “FAB counseled me on family
business transition and key elements of the mergers and
acquisitions (M&A) process,” notes Jim. He cites FAB
members Doug Ruggles of Martin Industrial in Florence,
AL; and Giovanni Cespedes of Falcon Fastening Solutions
in Charlotte, NC, for perspective on the dynamics of
family business management. In Ruggles’ case, Martin
Industrial is in the third generation. “Adam Pratt of
Sherex in Buffalo, NY, and Matt Goldberg of AMPG from
Indianapolis, IN, have provided me a lot of insights into
LEAN and operational principles, while Tim O’Keeffe of
G.L. Huyett from Minneapolis, KS, has a background in
M&A,” says Jim.
Nick recently attended his first FAB meeting, a peer
review of Falcon Fastening Solutions in Charlotte, NC.
Falcon is also in transition, and Giovanni Cespedes and
his wife, Carrie, purchased the company from Carrie’s
parents, Don and Joan Nowak, last year. “I am surprised
by the amount of candor and personal disclosure that I
see in these meetings,” notes Nick. “I see peers who
prepare in advance and really strive to deliver value to
others.” Giovanni Cespedes adds, “I am grateful for
the feedback from FAB, and while sometimes it can be
disarming to hear earnest feedback, I need executive
insights and sometimes in executive management you
are isolated. FAB brings me not only wisdom, but also
emotional support that we all can use.”
At 62, Jim now intends to pursue a doctorate in
business from Oklahoma State University, and has formed
a consulting practice known as JPR Global Partners, with
specialties in talent assessment, M&A, and strategic
management.
Nick is also beginning a new journey: “It is personally
comforting to me to know that I have Jim and Dick a phone
call away; and the FAB Group to lean on for peer review.
I know I have a lot to learn, but I will always admire and
remember Grandma Oma and her survival instincts as I
reflect on my mission to make this division among the
most profitable and strategic for MSC.”
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FASTENER ADVISORY BOARD