How to Avoid Litigation Fallouts in M&A: Lessons from Dick’s Sporting Goods’ Foot Locker Acquisition
In May 2025, Dick’s Sporting Goods announced its $2.4 billion acquisition of Foot Locker—an 86–90 percent premium that combined Dick’s “House of Sport” experiential venues with Foot Locker’s 2,400 retail locations across 26 countries. While transformative, such high-profile mergers carry significant M&A litigation risks that can erode deal value, stall integration, or even scuttle the transaction altogether. To avoid litigation fallouts in acquisitions, dealmakers must think beyond price and structure a meticulous legal playbook that spans regulatory, fiduciary, financing, contractual, employment, governance, and—yes—even smaller‐scale—dimensions.
1. Pre-Deal Antitrust & Regulatory Clearance
Antitrust clearance and regulatory approval set the foundation for a smooth transaction. By modeling combined market shares—both in brick-and-mortar and digital channels—parties can map overlap and pinpoint jurisdictions requiring filings, from the Hart-Scott-Rodino Act in the U.S. to the EU Merger Regulation overseas. Early engagement with competition authorities, backed by consumer-choice analyses and complementary retail-format rationales, can preempt second-requests or antitrust challenges. Preparing divestiture or remedy options in advance ensures that, if authorities demand a remedy, the parties can react swiftly without renegotiating the merger agreement.
2. Shielding Against Shareholder & Derivative Suits
Shareholder and derivative suits pose a perennial threat whenever public-company boards approve a premium sale. Plaintiffs often allege breach of fiduciary duty or an inadequate bidding process. To shield against these claims, boards should document every valuation step, from fairness opinions by independent banks to detailed minutes reflecting competitive auction rounds. Transparent disclosures in proxy statements—outlining valuation inputs, strategic rationale, and conflict-of-interest safeguards—reinforce the fairness narrative and discourage opportunistic lawsuits.
3. Securing Financing & Limiting Funding Claims
Securing financing commitments before signing is critical to prevent financing-related litigation. Dick’s relied on a mix of cash on hand and fully underwritten bridge loans. Locking in debt facilities with explicit commitment letters, staggering draw-downs in sync with deal milestones, and narrowly framing any financing-out conditions all but eliminate creditor claims that the acquirer misrepresented its ability to fund the purchase.
4. Preventing Post-Close Contractual & IP Disputes
Post-close contractual and intellectual-property disputes can derail integration if key partners or landlords object to assignments or seek renegotiation. A comprehensive contract audit—spotlighting change-of-control clauses in vendor, licensing, and lease agreements—allows acquirers to negotiate novations or consents well before closing. Purchasing representations and warranties insurance (RWI) further shields against unknown breaches in critical contracts.
5. Managing Employment-Related Liabilities
Employment-related liabilities multiply in large retail chains that employ thousands worldwide. Global HR due diligence—covering union pacts, WARN Act obligations, and severance agreements—enables early resolution of pending wage-and-hour or discrimination suits. Clear transition communications about reporting structures, benefits alignment, and headcount plans reduce uncertainty and forestall lawsuits by disgruntled employees.
6. Leveraging Deal Structure & Governance Safeguards
Savvy deal structure and governance safeguards reinforce deal certainty. Offering a dual-track consideration (both cash and stock) appeases diverse shareholder preferences, while empowering a special committee of independent directors addresses any conflicts of interest. Precise drafting of material-adverse-effect (MAE) thresholds and reverse-breakup fees deters opportunistic walk-aways and sets clear guardrails for both parties.
7. Key Considerations for Smaller Acquisitions
Even in smaller-scale acquisitions—such as purchasing a niche competitor or combining with a regional player—many of the same litigation pitfalls arise, albeit on a different scale. Antitrust review may be limited or unnecessary if combined market shares remain low, but it’s still prudent to confirm exemption thresholds. Shareholder suits are less common for private or family-owned targets, yet vendors and minority investors can claim breach of contract or misrepresentation. Financing risk is often handled with seller notes or earn-outs instead of large credit facilities—so draft clear payment triggers and default remedies to avoid debt-related disputes. Contractual diligence should focus on key customer and supplier agreements, especially any change-of-control or termination clauses that could accelerate payments or trigger penalties post-close. Employment liabilities in smaller firms can concentrate around “key person” agreements or non-compete covenants—ensure those contracts are assignable or renegotiated to maintain continuity. Finally, lightweight governance measures—such as a joint steering committee or post-close integration checklist—can deliver the same risk-mitigation benefits without the formality and expense of a full special-committee process.
Conclusion
By weaving these seven litigation-avoidance strategies into your M&A playbook—antitrust and regulatory planning, fiduciary-duty defensibility, financing certainty, contractual diligence, employment risk management, governance architecture, and small-deal adjustments—you can safeguard transaction value, accelerate integration, and steer clear of costly courtroom battles. Whether you’re orchestrating a $2.4 billion global merger or acquiring a local competitor, strategic legal planning ensures you unlock the full competitive upside of your M&A ambitions without getting bogged down in litigation.