Jurisdiction Tug-of-War: Buyer vs. Seller – Who Wins in Acquisition Negotiations?

December 26, 2024

by a searcher in Austin, TX, USA

My earlier post had English errors and was not clear... Here is an improved version

In an acquisition deal, jurisdiction is often a key point of negotiation.

Imagine this scenario:

The buyer insists on Delaware as the jurisdiction, citing its business-friendly laws.

The seller, however, prefers the jurisdiction to align with the business's physical location, arguing it’s more practical.

Who should have the upper hand here?

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Reply by an intermediary
from Pepperdine University in Portland, OR, USA

Is this really what you meant to ask? The choice of the buyer between Delaware or the choice of the same buyer of a preferred jurisdiction? Or were you meaning to suggest the choice between a buyer and seller's preferences for jurisdiction?

The question is not a simple one to generally answer because it depends on the laws, practices, and biases in the state where the buyer or investors are located, those in the state where the business is being acquired, and those in Delaware.

However, I'll share a practical consideration: if there is a dispute of some sort, it may be far easier for both parties if the jurisdiction is where the acquired business is located, as it may make discovery & depositions easier and more efficient due to proximity to the business.

Reply by a professional
from The Johns Hopkins University in Basking Ridge, NJ 07920, USA

Agreed with the above. Jurisdiction relates to where a dispute will be resolved. While the term is negotiated, it is often far down the priority list (which, in my opinion, it generally should be). In fact, the applicable law is usually a much more impactful consideration. I have drafted agreements as well as litigated these issues many times. Happy to discuss if you have a specific concern, but focus much more on business terms.

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