Akorn v. Fresenius: A MAC in Delaware

Until Vice Chancellor Laster’s decision last week in Akorn Inc. v. Fresenius KABI AG, no Delaware court had released an acquiror from its obligation to close a transaction as a result of the occurrence of a “Material Adverse Effect.”

The cases previously adjudicated in Delaware all had required the acquiror to close, often despite a significant diminishment in target value and, in some, the court criticized the acquiror for seeking to avoid its obligations based on little more than buyer’s remorse.  Against this weight of precedent, the Vice Chancellor found that the grievous decline of generics pharmaceutical company Akorn, Inc. after it agreed to be acquired by Fresenius constituted a MAC.  While Akorn presents a stark set of facts and the Delaware Supreme Court has yet to have the final word in the case, the decision nonetheless provides useful guidance to practitioners in shaping and navigating MAC clauses and related contractual provisions. 

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