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Key Points In AB Stable VIII LLC v. Maps Hotels and Resorts One LLC, the Delaware Court of Chancery issued a precedential decision addressing whether a buyer could walk away from an M&A transaction because the target company’s responses to the COVID-19 pandemic constituted either (1) a “material adverse effect” (MAE) or (2) a breach of the covenant to operate in the ordinary course of business between signing and closing (“Ordinary Course Covenant”). Although the MAE definition did not include an exception for the effects arising from a “pandemic” or “epidemic,” the court f...

To print this article, all you need is to be registered or login on Mondaq.com. In the months following the onset of the COVID-19 pandemic, a slew of parties filed lawsuits in US courts relating to M&A transactions that were signed prior to March 2020 and that buyers were seeking to terminate as a result of the pandemic. In these lawsuits, buyers commonly alleged one (or both) of the following as justification for their failure to close: (i) that the target suffered an MAE as a result of COVID-19's impact on its business; or (ii) that target materially breached the con...

To embed, copy and paste the code into your website or blog: In the months following the onset of the COVID-19 pandemic, a slew of parties filed lawsuits in US courts relating to M&A transactions that were signed prior to March 2020 and that buyers were seeking to terminate as a result of the pandemic. In these lawsuits, buyers commonly alleged one (or both) of the following as justification for their failure to close: (i) that the target suffered an MAE as a result of COVID-19’s impact on its business; or (ii) that target materially breached the conduct of business covenant by virtue of it...

To embed, copy and paste the code into your website or blog: On November 30, 2020, Vice Chancellor Laster of Delaware’s Court of Chancery issued the first case where the pandemic provided a company with the ability to walk away from its contractual obligations in a sale transaction, analyzing both the material adverse effect (“MAE”) provisions and ordinary course covenants. AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC et al., C.A. No. 2020-0310-JTL (Del. Ch. Nov. 30, 2020). The AB Stable case involved the attempted sale by AB Stable VIII LLC (the “Seller”) of 15 hotels to...

To embed, copy and paste the code into your website or blog: On November 30, 2020, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery issued a post-trial decision addressing contractual issues related to the effects of the COVID-19 pandemic on the sale of a collection of luxury hotels. The case,  AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, was one of many busted deal lawsuits filed in the Court of Chancery implicating COVID-19's impact on M&A, with the opinion being the first to formally address these issues. The 242-page opinion found that the pandemic did not cau...