COVID-19 M&A Closing Considerations

Even though we are in the early days of assessing the impact of the COVID-19 pandemic on mergers and acquisitions, much has already been written about the extent to which this crisis could amount to a material adverse change (MAC) under acquisition agreements that are pending closing. Of course, the answer depends on what the agreement says and whether the change satisfies the materiality and durational significance standards under applicable law (see, e.g., Akorn v. Fresenius (Del. 2018)). This note highlights related issues that buyers and sellers should also consider as they march toward closing:

• Interim Operating Covenants. Acquisition agreements invariably require sellers to conduct the business in the ordinary course consistent with past practice, and expressly limit a laundry list of extraordinary activities. Despite a seller’s best intentions to comply with such covenants, it may become necessary to incur additional debt, accelerate collections, stretch