Whit Roberts, Deputy Managing Partner of Locke Lord’s Dallas office, authored an article examining the Akorn, Inc. v. Fresenius Kabi AG decision in October 2018 and how it will affect “material adverse change” (MAC) clauses in Texas. MAC clauses, regularly seen as a closing condition in most acquisition agreements, such as stock purchase, merger or asset purchase agreements, were upheld for the buyer’s use of a MAC provision in Delaware court in Akorn. The author notes, “Through the Akorn decision, the Chancery Court has endorsed the ideas that time, attention and properly written and construed MAC clauses will only be upheld when justified by the facts of the individualized case. Beyond that, MACs will not be allowed as tools for remorseful buyers trying to exit a transaction.”
When addressing the affect the Akron decision may have, the author ultimately concludes, “The Akorn decision does little to move the needle, in either Texas or Delaware, with regard to interpreting MAC clauses. As noted, Akorn simply provided a further building block for an already well-established Delaware MAC jurisprudence. A jurisprudence which, like in Texas, places emphasis on the terms agreed, the manner in which the MAC was construed, and the nature of the transaction as a whole. Only time and future decisions will tell if Texas decides to break from its current MAC interpretations.”
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