Coherent Economics’ Client NetApp Prevails at Trial in M&A Dispute

On Wednesday, August 2, 2023, Vice Chancellor Lori W. Will of the Delaware Court of Chancery entered a verdict in favor of Coherent Economics’ client NetApp, Inc.

NetApp, Inc., a publicly-traded data management company based in San Jose, California, acquired Cloud Jumper, a small privately-held technology company, for $35 million in April of 2020. Following completion of the acquisition, NetApp discovered that Cloud Jumper’s revenues were overstated due to Cloud Jumper’s undisclosed practice of recording internal billings from the use of its own products as revenues. NetApp then sued the sellers for breach of contract and fraud.

Coherent Senior Managing Director Ann Hughes submitted an expert report and testified at trial in July of 2022 on the economic substance of Cloud Jumper’s internal billings and their proper treatment under GAAP accounting standards in Cloud Jumper’s consolidated financial statements. Vice Chancellor Will cited her analysis favorably throughout her opinion, noting that “[Ann Hughes] explained that bona fide transactions in financial statements reflect ‘revenues from a third party.’ The Internal Billings lacked economic substance.”

NetApp, Inc. was represented by A. Thompson Bayliss, Matthew Miller, Joseph Sparco, Peter Cirka, and Anthony Sarna of Abrams & Bayliss LLP. Ann Hughes was supported by a team at Coherent Economics including Dr. Dora Altschuler and others. 

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