Purchase Price Adjustments Gone Wrong

Introduction

An acquisition agreement's purchase price adjustment  – where lawyers pretend to be accountants and accountants pretend to be lawyers  – is a potential minefield of unpleasant surprises. Readers of Sponsor Sync will be familiar with a certain dispute involving a West Coast-based grocery store chain.¹ In this article, we turn our attention to another cautionary tale, this time involving a Bitcoin mining operator.²

Adjustments Gone Wrong

The relevant dispute in Northern Data turned on whether $22,490,956 of payments the target received should have been recognized as deferred revenue as of closing. Sellers did not recognize the disputed payments as such, and they received closing consideration of $52,812,202 for the target. Following the closing, buyer took the opposite view, recognizing the full amount as deferred revenue, which increased closing indebtedness by $22,490,956, decreasing deal consideration accordingly. The parties submitted the dispute