Transaction Case Study:
Restaurant Chain Is Served Fine Ending

Shields solves a problem that threatened a Multi-Million-Dollar Restaurant Transaction.

Shields Legal devised a creative indemnification strategy to facilitate the closing of the sale of a well-known chain of restaurants and bars when the buyer threatened to re-negotiate, delay, or walk the deal due to pending unresolved personal injury litigation and claims.


Our client was a well-known restaurant and bar chain having multiple locations throughout the United States. As is often the case in the restaurant business, the client was dealing with a number of pending personal injury-type claims or lawsuits in several jurisdictions. The client’s ownership structure was complex and included a number of equity holders. When the client received an attractive purchase offer from a buyer, the client decided to accept and desired to complete the sale within a compressed time period.


The client disclosed the pending personal injury claims and litigation in the course of due diligence. The buyer stated that it would not proceed with the sale until all of the pending claims were fully resolved and the pending lawsuits dismissed. The buyer’s stated position threatened to delay the transaction for months or years as the pending claims were processed and the lawsuits worked their way through the various jurisdictions. The buyer’s unrealistic insistence on a “clean claim slate” conflicted with the client’s desire to complete a transaction by the approaching year‘s end and the equity holders’ objective to achieve maximum value from the transaction.


Shields Legal’s transaction team recognized that the pending claims and lawsuits had to be addressed in a meaningful way in order to move the deal forward. The challenge was how to do that in a way that would preserve the transaction value to the client and equity holders. Our transaction team collaborated with our litigation team to devise a structure through which the individual restaurants with outstanding claims or lawsuits obtained special insurance or set up special escrows for claims.  This structure enabled the parties to move forward to closing without any material renegotiation of terms or carve out of restaurant locations, which would have resulted in substantial reduction in the purchase price.


Shields Legal devised a unique and creative indemnification strategy and corporate structure which (1) mitigated buyer risk in a complicated restaurant exit transaction, (2) accomplished our client’s objective of a completed sale, and (3) yielded maximum transaction value for the client’s equity holders. This was a win-win-win for the Shields Legal transaction and litigation teams.