A meal of material adverse changes
|Area||Mergers and Acquisitions|
Article originally published in the Canadian Lawyer Magazine, November 2018
Excerpt from "A Meal of material adverse changes":
The term “MAC” appears, it seems, as often in M&A transaction agreements as it does in McDonald’s restaurants worldwide. The difference, likely because of phenomenal marketing, is that virtually everyone knows what is in a Big Mac, but the concept as used in M&A (where it refers to a “material adverse change”) is less well understood. So, when courts provide insight into the meaning of material adverse change, it receives a lot of attention, a satisfying MACnugget of guidance.
The recent decision in Akorn, Inc. v. Fresenius Kabi AG, et al. has received much attention not only for this reason but because it is the first time that the influential Delaware courts have permitted a buyer to terminate a pending M&A transaction based on a MAC. In previous decisions, the bar had been set very high. Staying with the fast food theme, the common understanding was that for a development to constitute a material adverse change, it had to be a real whopper.