Normally, my posts describe and analyze specific niche aspects of an M&A deal in order to provide what I hope readers deem as helpful advice. While the material below initially follows the same roadmap, I also wanted to take this unique opportunity during the COVID-19 pandemic to raise a glass to all of the frontline healthcare, grocery, transit, and other workers risking their lives on a daily basis to save ours, as well as those working in the M&A sphere, including my colleagues and clients, and their advisors and representatives (and dare I say even opposing parties and their teams) who have stepped up their game with respect to collegiality.
As mentioned above, the COVID-19 pandemic has upended the world in countless ways, with healthcare M&A transactions of course having not been spared. Many promising deals have been placed on hold and the ones powering through will now encounter new hurdles to clear before closing. Here are some quick issues that M&A parties should consider with the current state in mind.
The Deal Itself
- Should the parties delay or push forward?
- If delayed, focus on potential extension of various previously set deadlines:
- Confidentiality
- Letter of Intent (binding provisions)
- Due Diligence Periods, Scope, and Access (also applicable below)
- If moving forward, consider necessary or resultant changes to (either pre-signing or through a post-signing amendment):
- Financials
- Company Results; Valuation
- Purchase Price
- Working Capital Adjustments
- Earn-outs
- Disclosure Schedules
- Closing Conditions
- Third-Party Availability re
- Regulatory Approvals/Permits
- Consents to Assignment/Change of Control
- Material Adverse Effect (Change) Definition
- Representations and Warranties
- Indemnification Provisions
- Force Majeure
- Operations Between Signing and Closing; Ordinary Course of Business Definition
- Buyer Consents
- Seller Carve-Outs for Contingency Measures
- Termination Provisions
- Third-Party Availability re
- Financials
- If delayed, focus on potential extension of various previously set deadlines:
Again, I am happy to report that in my experience, the players behind the deal have largely exhibited a much more cordial and empathetic tone during the COVID-19 pandemic, and I have noticed some very encouraging signs recently. In addition to a generally softer and more understanding or forgiving tenor, the typical greeting or sign off has resembled some variation of the following: “I hope all is well on your end, and you and your family are staying safe and healthy during these challenging times.” While it is true that this clause is often stated in response to something similar initiated on my end, I have also observed several opening iterations from all of the M&A players.
It is easy to brush these interactions off, but providing professional services and doing business in a high stakes and fast paced industry is stressful enough (especially at this point in time) so when your “adversaries” become a little less so it makes life that much easier; not to mention treating people with respect is the right thing to do, of course. My hope is that this type of behavior will last beyond the current state of affairs, but only time will tell. Have you noticed similar changes in the world of M&A? If so, do you think such conduct will survive beyond the COVID-19 pandemic?
David Kahn practices in the area of healthcare law, concentrating on Mergers and Acquisitions.