Publication Date: April 24, 2020
Although the extreme downward market movements in mid-March, which led to a sudden widening in risk arbitrage spreads, are arguably behind us, COVID-19’s risks to pending M&A persist. No meaningful deals have been announced in weeks and spreads remain uncharacteristically wide. Our focus in this report is Europe, and we examine the sturdiness of Material Adverse Effects (MACs) and conditions in European public M&A and to consider whether COVID-19 could entice and test the ability of an acquirer to walk away. Across 10 multi-billion-euro deals, we describe MACs as conditions to closing and framed as covenants. We also show how acquirers have historically tried to get out of European deals, most often citing target breaches and invoking other specific conditions. Our analysis includes over 20 case studies of precedent and pending deals and rulings.
1. MACs Within Deal Conditionality and Representations and Warranties 2. Opportunities to Invoke “Other” Specific Conditions 3. COVID-19 and Commitments to Complete Transactions 4. Specific Language Disclosed in Deal Documents • BME / SIX Group • Daejan Holdings / Freshwater • Fiat / Peugeot • GrandVision / EssilorLuxottica • Ingenico Group / Worldline • Osram Licht / AMS • Pargesa / Parjointco • Qiagen / Thermo Fisher Scientific • RIB Software / Schneider Electric • UBI Banca / Intesa Sanpaolo Appendices A. European Risk Arbitrage Universe B. Break Price Calculations, By Company C. High Level Takeaways from Current and Precedent Deals
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