Last week, the Delaware Court of Chancery issued its first opinion addressing the validity of an asserted Material Adverse Effect (“MAE”) following last year’s Akorn decision, the first to find an MAE. In contrast to Akorn, Chancellor Andre G. Bouchard’s opinion in Channel Medsystems, Inc. v. Boston Scientific Corporation refused to find that an MAE “would reasonably be expected” to occur. Click here to view the key takeaways from the Channel opinion, including:

  • Channel confirms that Akorn did not loosen the “high burden” buyers face in proving an MAE.
  • The court’s holding (based on its reading of the contract) that a buyer could only terminate if it expected an MAE to occur by closing may surprise some MAE practitioners.
  • Though there is no bright-line for satisfying the “quantitative significance” aspect of the MAE test, parties attempting to assert an MAE should consider whether the decrease in the target’s implied long-term equity value is at least 20% to improve their chances of a court validating the asserted MAE.