In re Weinstein and Mallinckrodt: Implications for Royalty Financings, M&A Earn-Outs, and Other Transactions Involving Future Payment Obligations
JD Supra: Mergers
JUNE 27, 2024
Deal structure matters, particularly in bankruptcy. The Third Circuit recently ruled that a creditor’s right to future royalty payments in a non-executory contract could be discharged in the counterparty-debtor’s bankruptcy. The decision highlights the importance of properly structuring M&A, earn-out, and royalty-based transactions to ensure creditors receive the benefit of their bargain — even (or especially) if their counterparty later encounters financial distress.
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