Next Level Due Diligence

Nearly every M&A transaction begins with a look at the possibilities: the strategic fit; the synergies; the drivers for the deal. Naturally enough, the next step will turn to an evaluation of risk.  Traditionally, legal exposure from toxic tort and other forms of product liability has rated high on the list of issues to identify and protect against — up there with environmental liabilities and compliance exposures. Recently, however, eye-popping damage awards have raised the stakes, suggesting that acquirers may...

MAE is MIA No Longer: Delaware Court Upholds Use of “Material Adverse Event” Clause for the First Time

In Akorn, Inc. v. Fresenius Kabi AG, the Delaware Chancery Court held that Fresenius, a German pharmaceutical company, was justified in invoking a “material adverse event” (MAE) clause to terminate its $4.8 billion merger agreement with American generics manufacturer Akorn, Inc.  Although MAE clauses are common in large transactions, Akorn marks the first time that the Chancery Court has upheld a buyer’s use of such a clause to back out of a merger agreement. Nevertheless, the Court’s reasoning suggests that...