COVID-19: Strategic Transaction Litigation

By Randi Morrison posted 06-08-2020 07:42 PM

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"COVID-19: Assessing Seller-Initiated M&A Litigation Amid the Pandemic" from WilmerHale provides an instructive overview of the assertions and defenses buyers and sellers are advancing to escape their obligations to complete pending M&A transactions based on a number of outstanding cases. Generally, buyers are seeking to use MAE provisions to avoid closing transactions based on COVID-19 impacts notwithstanding their heavy burden of proof and general assumption of market/industry risk; in response, sellers are characterizing conditions as those specifically covered by MAE carve-outs (industry-wide events, general economic conditions in seller markets) and asserting buyers' failure to use commercially reasonable efforts to close the deals.

Buyers seeking to exit deal obligations are also asserting seller failures to operate in the ordinary course of business as is typically required in a strategic transaction agreement. In response, sellers are advancing a number of arguments including that their operations are/have been consistent with legal requirements, peer company measures, and past practices in a downturn environment.

While the ultimate outcome of each situation is of course very much fact-dependent, the overview may help to inform companies' strategic transaction planning and preparedness. This post first appeared in the weekly Society Alert!

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