In response to the coronavirus pandemic which has shut down large sectors of the economy around the world, companies are grappling to come to terms with declines in revenue due to social-distancing measures and other fundamental shifts in the way workplaces are adapting to remote working.
M&A transactions that signed prior to the pandemic but were not yet closed have not been spared, with cases emerging around the world – including the high profile legal dispute between Brazilian aircraft maker Embraer SA and Boeing Co over Boeing's cancellation of its deal to buy control of Embraer's commercial jet business for US$4.2 billion, WeWork filing a lawsuit against Japan's SoftBank Group and its Vision Fund for terminating a US$3 billion tender offer for WeWork shares, the owners of American Express Global Business Travel filing a lawsuit against the purchaser group for abandoning the acquisition, Xerox dropping its US$34 billion takeover offer for HP and Boeing suppliers Hexcel and Woodward calling off their US$6.4 billion joint venture transaction, but to name a few.
The emergence of disputes such as these might no doubt be the first of many, with an increasing number of buyers looking to escape acquisition transactions in light of the business of target groups being financially adversely impacted by the coronavirus pandemic. However, this begs the question – are these 'necessary' steps being taken by target groups such as furloughing staff, suspending operations, non-payment of rent, shutdown of workplaces and other government-imposed measures to keep afloat, deemed as a breach of acquisition agreement provisions that would warrant termination by a buyer?
This article explores the interplay between various elements of an acquisition agreement in the context of hardships presented by COVID-19.
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