September Edition 2020

51 The COVID-19 pandemic has caused severe disruption, distress and uncertainty for companies across almost every industry. While this initially led to a substantial slow-down in the M&A market, transactional activity is expected to accelerate in certain areas as the economy begins to recover. For example, we expect to see more carveouts by companies that seek to divest non-core assets, acquisitions of distressed companies, financings of independent companies that may have liquidity issues, and divestitures or joint ventures by private equity funds that seek to exit investments or bring in new partners. Prospective sellers and buyers alike should have an increased focus on specific considerations as they evaluate new opportunities during and post- COVID-19. We anticipate lasting changes to three main categories of deal terms in M&A transactions as companies and the economy begin to recover from the pandemic: execution risk, risk allocation and purchase price. Contractual Issues – Any contractual issues that may have surfaced in connection with a target’s failure to perform all of its obligations under its existing contracts due to the COVID-19 pandemic (e.g., withholding rent or failing to fulfill orders within a specified timeline), and any potential liability associated with such nonperformance, should be addressed prior to closing. Parties should consider whether force majeure provisions contained in the target’s contracts are applicable and may excuse certain of the target’s contractual obligations. Third Party Consents – The parties should coordinate closely to obtain any third party consents required under existing contracts—particularly with respect to contracts that the Company has not been in compliance with— taking into account whether there will be any significant delays in obtaining such consents due to limitations on third parties’ operations in connection with the pandemic. MaterialAdverseChange –Thepartiesshouldconsider includingcoronavirus- related carveouts in material adverse change provisions, pursuant to which a party may be permitted to terminate a definitive agreement due to changes in the target’s business between the signing and closing. The parties should consider how long the impact of the pandemic on the target’s business must 1. Execution Risk