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Chancery Court––for the First Time–– Releases Buyer from Obligation to Close due to Target MAE

Posted by on Wednesday, October 21, 2020 in Delaware Corporate Law Bulletins, En Banc, Volume 73.

Robert S. Reder & Katie Clemmons | 73 Vand. L. Rev. En Banc 227 (2020) |

“Under the standard adopted by the Delaware Court of Chancery (‘Chancery Court’) in In re IBP Inc. Shareholders Litig., 789 A.2d 14 (Del. Ch. 2001) (‘IBP’), a buyer seeking release from its obligations under an acquisition agreement due to a target company material adverse effect (‘MAE’) must satisfy a very stiff burden of proof. In fact, for nearly two decades following IBP, the Chancery Court did not release a single buyer from its obligation to close due to an MAE. That statement can no longer be made following the Chancery Court’s decision in Akorn, Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300-JTL, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), aff’d, 198 A.3d 724 (Del. 2018) (‘Akorn’).”

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Robert S. Reder and Katie Clemmons