With credit tightening, some dealmakers are looking for ways to walk away from deals that suddenly look shaky. One legal weapon that attorneys for purchasers and financial backers are brandishing is the "material adverse effects" contract clause, routine provisions that permit termination of a transaction where business conditions have deteriorated for a target company. Litigation over a $26 billion buyout of Sallie Mae is one of the few cases in which this murky area of the law has been analyzed.
November 14, 2007 at 12:00 AM
1 minute read
The original version of this story was published on Law.Com
With credit tightening, some once-enthusiastic dealmakers are looking for ways to walk away from deals that suddenly look shaky.
One legal weapon that attorneys for purchasers and financial backers are brandishing is the so-called “material adverse effects” contract clause, routine provisions that permit termination of a transaction where business conditions have deteriorated for a target company.
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