Price Adjustments Lawyer
When contemplating a business transaction, there are certain pieces of information that you know. For instance, you likely know your company’s current costs of production, the budget you have to work with in purchasing a good or service, and the length of the initial contract you are seeking. However there are many factors that even a seasoned negotiator cannot know or anticipate. For example, volatility in the marketplace can greatly affect the costs of raw materials and fuel. Since even commodities traders cannot tell you what the price of a certain commodity will be on a certain day, it is extremely unlikely a contract could contemplate the same with any level of precision.
In light of these knowledge gaps and the ever-changing markets, it is important that you business works with an attorney experienced in drafting contracts. An experienced drafter understands that there are certain variables that must be identified, addressed, and accounted for to reduce the risk inherent in the deal. The attorneys of Meredith & Narine are experienced in applying price adjustment mechanisms to an array of contractual negotiations. If you are seeking professional, efficient legal guidance for your company or corporation’s contractual needs, call our firm at 215-995-2769 or contact us online today.
Purchase Price Adjustments in M&A Deals
Mergers and Acquisitions are complex deals that can take months or years to plan, draft and execute. As such, factors and circumstances can, and often do, change from day one of the process until the closing date. Furthermore, several additional months can pass from the time of closing to when the buyer actually acquires the targeted company. Inclusion of appropriate purchase price adjustment provisions in an M&A agreement can protect the buyer by nullifying the seller’s incentive to reduce the working capital of the business. A price adjustment provision can also protect the seller by preventing the buyer from realizing an unforeseen windfall should the working capital increase significantly.
Price adjustment will typically be drafted such that the purchase price can be adjusted upwards or downwards based on the circumstances. First, the parties must agree on baseline known as the initial working capital. From there they can work to develop the mechanics of the price adjustment provision or provisions. Depending on the needs, goals, and sensitivity to risk present a dollar-for dollar, de minimis, or capped adjustment method may be utilized.
Government Contracting and Price Adjustments
Per FAR 52.243-1, the contracting officer is permitted to make changes to a government contract. Upon issuance of a written order the contracting officer can alter an array of requirements or even the scope of the contract. Changes that may be made can include the location of delivery, the date of delivery, the method of shipping, and many other items. Unfortunately, these changes can subject businesses with government contracting ventures to additional expenses and costs.
Typically a contractor in these circumstances is entitled to a price adjustment. However, this request must be made within 30 days from the date the written order detailing the changes was received. Making a request for an equitable price adjustment can permit the contractor to receive additional costs and reasonable profits on the costs. For requests that exceed the simplified acquisition threshold, the contractor may be required to file a Certification of Request for Equitable Adjustment. However to receive a price adjustment the government contract must be able to show required pricing or cost data and actual cost information.
While a contractor affected by changing contractual circumstances can also file a claim after the fact, there are benefits behind requesting a price adjustment. First, the matter may be able to be handle prospectively. Second, the costs associated with filing for an adjustment are generally reimbursable. Costs associated with filing a claim after the fact typically are not reimbursable.
Experienced Price Adjustment Attorneys in Philadelphia
Changing circumstances in a business deal can threaten the continued viability of a company if the contract was drafted unartfully and it lacks important control mechanisms. However, working with an experienced attorney seasoned in commercial transactions can reduce the risk your business is exposed to by including appropriate price adjustment mechanisms. Likewise, we are also experienced at guiding and administering government contracts for all government contractors including major corporations small disadvantaged businesses (SDBS), woman-owned small businesses (WOSBS), and service-disabled veteran-owned small businesses (SDVOSBS). To schedule a private legal consultation with our business litigation attorneys call 215- 995-2769 or contact us online today.