The Delaware Chancery Court Finds a “Material Adverse Effect” for the First Time
One of the key terms in an acquisition agreement is the “Material Adverse Effect” definition, which essentially defines when a buyer does not have to complete an agreed-upon acquisition as a result of adverse change to a target’s business during the period between signing and closing. Despite all of the attention given to this term by M&A practitioners, until the recent decision in Akorn, Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300-JTL (Del. Ch. Oct. 1, 2018), the Delaware Court of Chancery had never found that a buyer was justified in terminating a public company merger agreement on the basis that a Material Adverse Effect had occurred.