The Material Adverse Effect Landscape after Akorn v. Fresenius

Weil, Gotshal & Manges LLP

The Court of Chancery’s October 1, 2018 opinion in Akorn, Inc. v. Fresenius Kabi AG1 marked the first time in Delaware history that the Court of Chancery confirmed the existence of a Material Adverse Effect (“MAE”) and validated the buyer’s termination of a merger agreement on that basis. That outcome is important because, in the ten years since the last significant MAE opinion, many deal lawyers had come to believe that courts would never actually find an MAE. At the very least, this ruling will give additional leverage to buyers to renegotiate the deal price between signing and closing based on an arguable MAE—unless and until the Delaware Supreme Court addresses these issues on appeal. The court has scheduled oral argument on the expedited appeal for December 5, 2018.

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