Recent Delaware cases appear to make two things clear. First, it remains extremely unlikely that a court will find an event or occurrence to fall within the general provisions of a Material Adverse Effect condition and as a consequence, allow a buyer to terminate an acquisition agreement. Second, the seller covenant to conduct the target’s business in the ordinary course pending closing of an acquisition may be emerging as an alternative area of focus for…
Since the current economic downturn began in February 2020 as a result of the COVID-19 pandemic, noncompete agreements have become increasingly scrutinized nationwide, and courts have become more reluctant to enforce them. A recent case filed in Harris County, Texas highlights this enhanced scrutiny with respect to an employee who was terminated during the pandemic. In Robert Garcia v. USA Industries, Inc., the district court granted a temporary restraining order (TRO) preventing USA Industries, Inc.…
In AB Stable VIII LLC v. Maps Hotel and Resorts One LLC et al., the Delaware Court of Chancery has published its first ruling regarding whether or not the effects of the COVID-19 pandemic constitute a material adverse effect (“MAE”) that would allow a buyer to terminate an acquisition agreement entered into prior to the COVID-19 outbreak in the U.S. Introduction In early 2019, AB Stable VIII LLC (“Seller”) initiated a sale process for…
Long-awaited relief has arrived for many struggling small businesses in the form of the Consolidated Appropriations Act of 2021 (the “Appropriations Act”), signed into law by President Donald Trump on December 27, 2020. Under the Appropriations Act, a summary of which can be found here, the Small Business Administration (“SBA”) was authorized to reopen the Paycheck Protection Program (“PPP”) for both first time borrowers (a “First Draw PPP Loan”) and for certain eligible borrowers…
The Small Business Administration (SBA) issued a Procedural Notice  on October 2, 2020, detailing required procedures impacting Paycheck Protection Program (PPP)[1] borrowers and lenders if: (i) twenty percent or more of the common stock or other ownership interest of the PPP borrower (an Equity Interest), including a publicly-traded entity, is sold or otherwise transferred, whether in one or more transactions since the date that the PPP loan was approved, including to an affiliate or…
The definition earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA have always been important and highly negotiated pieces of credit agreements and M&A transactions. However, with the unprecedented economic impact of the COVID-19 pandemic, these financial measurements take on even greater importance as borrowers seek to maintain financial covenants in their credit agreements and prospective buyers and sellers struggle to determine whether EBITDA, if determined without an adjustment for the financial impact…
Simon Property Group, Inc. (“Simon”) wants out of a deal to acquire its competitor, Taubman Centers, Inc. (“Taubman”), due to the COVID-19 pandemic. Simon, the buyer, is an Indiana-based company that owns malls, outlets, and shopping centers. Its last 10-K filed with the Securities and Exchange Commission states that it had an interest in more than 200 properties in the United States. For example, in Texas, Simon owns The Galleria in Houston, Katy Mills, Grapevine…
The collapse of a recent deal between the potential buyer and seller of a prominent retail chain shines a spotlight on the need to address the COVID-19 pandemic in acquisition and merger agreements. In SP v. Buyer LP, an affiliate of Sycamore Partners (“Sycamore”), and L Brands Inc., the parent company of the Victoria’s Secret retail store chain (“L Brands”), entered into a Transaction Agreement (“Agreement”) on February 20, 2020 through which Sycamore was to purchase…
On October 22, 2019, The We Company (“WeWork”), SoftBank Group Corp. (“SBG”), SoftBank Vision Fund (AIV M1) L.P. (“Vision Fund”, and together with SBG, “SoftBank”) and certain other parties entered into a Master Transaction Agreement (the “MTA”), as amended on December 27, 2019. The MTA included a series of transactions, including a tender offer, pursuant to which SoftBank would purchase up to $3 billion worth of WeWork stock (the “Tender Offer”) subject to the satisfaction…