Will A Billion Dollar Termination Shift The M&A Landscape?

The economic disruption caused by the COVID-19 pandemic has prompted a wave of litigation across the globe in respect of abandoned M&A transactions. These "busted deal" disputes typically involve purchasers invoking material adverse effect (MAE) clauses, interim operating covenants or related provisions in M&A agreements to avoid closing a transaction. Until recently, these provisions received scant treatment in Canadian case law. Last year,  we discussed the Ontario Superior Court of Justice's decision in Fairstone Financial Holdings Inc. v Duo Bank of Canada regarding MAE clauses. This week, in Cineplex Inc. v. Cineworld Group Plc and 1232743 B.C. Ltd., the same Court delivered a staggering $1.24 billion judgement to a target company for the purchaser's improper termination of their M&A transaction. The decision of Justice Conway provides new guidance on the interpretation of interim operating covenants under Canadian common law. It also addresses the relationship