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We have been tracking the impact of Material Adverse Change (MAC) and Material Adverse Effect (MAE) clauses on M&A transactions and how parties to certain M&A transactions are navigating the issues surrounding the termination of transactions in the context of changing business realities due to the global coronavirus pandemic.

Another recent case involves Juweel Investors Limited (“Juweel”), the owner of the company carrying on the business of American Express Global Business Travel (“GBT”), a corporate global business travel enterprise with over 10,000 clients in more than 140 countries.  In its complaint filed in the Court of Chancery in Delaware on May 11, 2020,  Juweel sought an expedited trial to obtain an order to compel several entities related to The Carlyle Group Inc. (“Carlyle”) and GIC (Ventures) Pte. Ltd (through Pure Magenta Investment Pte Ltd.) (collectively, “GIC”, and together with Carlyle, the “Purchasers”) to complete a transaction in which the Purchasers had agreed to acquire an ownership interest in GBT.

The transactions contemplated by the Share Purchase Agreement, dated December 16, 2019 (“SPA”), were scheduled to close on May 7, 2020.  As was seen in the Victoria’s Secret case reported on in our earlier post, the Purchasers claim that there was an MAE[1] and that GBT failed to comply with interim operating covenants between signing and closing by not operating in the ordinary course of business.
Continue Reading Terminations of M&A Transactions: Lessons Learned from American Express Global Business Travel

The global coronavirus pandemic has undoubtedly had an impact on businesses and M&A activity worldwide.  In light of current events, companies negotiating deals and the lawyers penning the contracts are paying closer attention to the paperwork.  In particular, careful drafting and thoughtful consideration of the Material Adverse Change (MAC) and Material Adverse Effect (MAE) clauses in transaction agreements (see our previous posts on MAC provisions) and a potential Canadian court decision on MAC clauses (see our previous post of April 30, 2020 and May 7, 2020), as well as the target company’s covenants, representations and warranties and the buyer’s closing conditions related to such representations and warranties, have proven especially important in how parties have been responding to the onset of the pandemic.

In recent months, we have seen a number of attempts in the U.S. to terminate deals on the basis of the impact of the pandemic to target companies’ businesses.  
Continue Reading Terminations of M&A Transactions: Lessons Learned from Victoria’s Secret and WeWork