Analysis of Material Adverse Change

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Counsel for the independent directors of a target company’s board retained Cornerstone Research and Glenn Yago of the Milken Institute in connection with a notification by an acquirer that it was terminating a proposed merger due to a material adverse change (MAC) in the target company’s business.

Counsel for the independent directors of a target company’s board retained Cornerstone Research and Glenn Yago of the Milken Institute in connection with a notification by an acquirer that it was terminating a proposed merger due to a material adverse change (MAC) in the target company’s business.

Dr. Yago researched changes in industry and market conditions following the company’s signing of the merger agreement to evaluate whether a MAC had occurred. As part of his assignment, Dr. Yago assessed the likelihood that the debt the company would be required to issue in conjunction with the merger would receive certain credit ratings. In connection with his analysis, Dr. Yago reviewed the company’s historical credit ratings, financial forecasts and SEC filings, public press, and analyst and industry reports.

The company terminated the merger agreement but subsequently entered into an agreement with another acquirer.

Dr. Yago found that a MAC had occurred. Changes in industry and market conditions following the signing of the merger agreement had negatively impacted the company’s financial and competitive position and the likely credit ratings that the proposed debt issue would receive. Dr. Yago presented his analysis to the independent directors. The company terminated the merger agreement but subsequently entered into an agreement with another acquirer.

Case Expert

Glenn Yago

Senior Director, Milken Innovation Center;
Senior Fellow/Founder, Financial Innovations Labs (Milken Institute – U.S.)