COVID M&A: Pre-Closing Considerations for MAE Definitions and Interim Operating Covenants

By: Veronica Lah
– Daily Journal

Manatt corporate and finance partner Jason Taketa and associate Veronica Lah authored an article for Daily Journal about the COVID-19 pandemic’s impact on M&A transactions as well as on interim operating covenants and MAE definitions as a result of related litigation. In the article, the authors highlighted some publicly available M&A agreements and analyzed various COVID-19-specific provisions used by buyers and sellers to examine how post-COVID-19 M&A deals have addressed legal issues and newly discovered risks resulting from the pandemic. They noted that a key issue many organizations are facing surrounds what the definition of “ordinary course” was prior to the current public health crisis, and that many companies have since decided to address COVID-19 in their M&A agreements “either a part of the definition of ordinary course or an express exclusion from ordinary course covenants.” Additionally, MAE definitions have begun including “pandemic and epidemic carve-outs, often specifically mentioning COVID-19.” The authors believe these changes will not only be important amid the current health crisis, but are likely to continue to affect M&A transactions moving forward.

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