On October 1, 2018, the Delaware Court of Chancery released its
decision in Akorn, Inc. v. Fresenius Kabi AG, finding for
the first time that a buyer had properly terminated a public
company merger agreement based on the occurrence of a
“material adverse effect” (sometimes also referred to
as a “material adverse change,” “MAC” or
“MAE”). The decision provides important guidance
regarding the circumstances where buyers may assert the occurrence
of a material adverse effect in terminating an M&A agreement
and may inform Canadian law and practice.
The decision
Fresenius agreed to purchase Akorn by way of a merger agreement
entered into on April 24, 2017. Shortly thereafter, Fresenius
learned of significant compliance and data integrity issues and
Akorn’s financial performance deteriorated significantly.
Fresenius subsequently terminated the merger agreement based on the
non-satisfaction of:
