Last week, a jury in Boston rejected a claim against Goldman Sachs in its role as investment banker to the sale of Dragon Systems Inc. The deal involved a sale of Dragon to Belgian company, Lernout & Hauspie, in consideration for which Lernout & Hauspie issued its own stock to Dragon’s shareholders in an all-stock deal. The trouble was that the acquirer, Lernout & Hauspie, soon became mired in a fraud and then filed for bankruptcy leaving the selling shareholders with nothing of value from the deal.
Among others, Dragon’s founders sued Goldman Sachs, the investment banker on the sell side for breach of duties. However, the jury was not persuaded about the claim because the Dragon itself appeared to be keen to close the deal in a speedy manner and ignored some red flags.
More details and analysis of this verdict are available at:
- M&A Law Prof Blog; and