Earlier this month, I blogged about the Delaware Supreme Court’s decision in Paragon Metals Holdings v. Smith, (Del.; 7/26), in which the Court held that gaps in the buyers’ due diligence did not preclude them from relying on allegedly fraudulent representations from the seller. This Mayer Brown memo discusses the decision. This excerpt addresses a few issues that I didn’t cover in my blog, the evidentiary standard applicable to fraud claims & the role of events that threaten the deal’s financing in establishing an MAE:
– Fraud claims are subject to the preponderance of the evidence standard—not a heightened clear and convincing evidence standard. The CEO argued that a “clear and convincing” evidentiary standard applies to fraud claims because fraud allegations carry moral stigma and can rest on circumstantial evidence. The Court rejected that argument and confirmed that ordinary civil preponderance remains the standard for Delaware fraud claims, noting that Delaware’s heightened pleading requirements already help screen out meritless claims.
– Events that threaten acquisition financing may help establish a material adverse effect. Proving an MAE remains difficult under Delaware law, so the trial court’s MAE finding is noteworthy. The “no MAE” representation was forward looking, and the trial court found it false because extensive changes to the target’s business with two major customers made it reasonably likely that the company would default on its acquisition financing and face bankruptcy. The Delaware Supreme Court affirmed that falsity finding because the CEO did not challenge the trial court’s conclusion.
The memo says that sellers should keep in mind that a forward-looking “no MAE” rep may require them to consider not only how the target operated prior to the closing, but also how any known adverse developments might affect the target after the closing given the buyer’s financing and capital structure. In other words, the memo says that “[t]he practical point is that sellers should assess forward-looking MAE representations against the real-world consequences of known adverse developments and disclose facts that could trigger those consequences.”
Traditionally, RWI insurers haven’t focused a lot of attention on a buyer’s due diligence investigation into the condition of the target’s assets. Insurers have generally operated under the assumption that buyers were conducting adequate due diligence investigations and that, in any event, condition of assets claims were unlikely to result in big losses to the carriers. According to this WTW blog, that’s no longer the case. This excerpt explains what’s changed – and why:
Over the past several years, the RWI market has absorbed some high‑severity claims tied to undisclosed or poorly understood asset‑condition issues. These have included:
Deferred maintenance and capex backlogs
Equipment failures shortly after closing
Systemic issues across multi‑site operations
Deficiencies in maintenance practices or asset‑tracking systems
Failures of highly technical or mission‑critical assets
These losses revealed a gap between what underwriters assumed buyers were doing and what diligence was actually being performed. In response, RWI insurers recalibrated their expectations. Buyers now encounter:
More detailed underwriting questions focused on physical assets, including historical maintenance and investment in capex
Heightened scrutiny of who performed the diligence and what their qualifications were
Requests for written technical or engineering reports
Narrower coverage positions when diligence is deemed insufficient or material issues are identified
The result is a more rigorous underwriting process in which asset‑condition risk is no longer treated as an afterthought.
The blog goes on to say that insurers now expect buyers to demonstrate a thoughtful and well-documented due diligence process if they expect full condition of assets coverage, and it provides details concerning insurers’ specific expectations concerning the quality and scope of that due diligence investigation in the current environment.
Experienced M&A practitioners know that the implied covenant of good faith can sometimes be used effectively as a wedge to pry open seemingly airtight contractual provisions in the name of “filling gaps.” However, many may not appreciate that, according to a recent Business Law Today article by contract guru Glenn West, an agreement’s “further assurances” clause can serve the same function.
Further assurance clauses typically include language to the effect that the parties are obligated to “take, cause to be taken, such further actions, as may be necessary, proper or advisable to evidence and effectuate” the transactions contemplated by the agreement. As this excerpt from Glenn’s article explains, there’s potentially more to this “boilerplate” than meets the eye:
While further assurances clauses are generally used to obtain an additional document necessary to fully evidence a transfer of assets in connection with the closing of a sale and purchase transaction, they are not necessarily limited to that purpose, particularly when they appear in an agreement governing an ongoing relationship.
Further assurances clauses have generally been described as “catchall contract provision[s] by which a party, after making a precise commitment to perform in some manner, makes a vague, more general commitment to take other actions that are incidental to, and necessary for, the performance of the core commitment.”
While “[s]uch a provision does not create a new obligation,” it may require parties to take additional actions that are consistent with the other express terms of the contract. One commentator has even described a further assurances clause as follows:
A further assurances provision is the exclamation point on the parties’ agreement. In the other parts of the agreement, the parties define their mutual objectives and detail their specific commitments to each other. By contrast, a further assurances provision is a general provision designed to require the parties to exercise a certain degree of effort to achieve the agreement’s overall objectives. It recognizes that parties do not and cannot contemplate and draft for every contingency. Thus, the further assurances provision serves as a gap filler and a back stop.
If that sounds a bit like an express version of the implied covenant’s gap-filling function, it should. One court has even suggested that “how other courts interpret the obligation to behave in good faith may suggest how a court should interpret the language contained in the Agreement’s further assurances clause.”
The article goes on to discuss how Vice Chancellor Laster interpreted the obligations imposed by a further assurances clause in a manner similar to those that might be imposed by the implied covenant in his recent decision in Facilities Holdings, LLC v. ASM Global Parent, LLC, (Del. Ch.; 6/26).
Ropes & Gray recently published the latest edition of its monthly “Dealmakers Digest,” which covers the top 10 M&A-related developments during June 2026. While quarterly deal volume broke records, the rising tide didn’t lift all boats. In fact, this excerpt suggests that last month was in many respects “the best of times” for mega-deals & strategics, and “the worst of times” for PE sponsors:
– Q2 2026 recorded highest deal value in recent history: With $1.7 trillion in global deal value, Q2 marked the highest quarterly value this century. Monthly deal value also reached a five-year high.
– Mega-deals mask declining deal activity: While the number of $10 billion-plus deals nearly doubled and deal values boomed year-over-year in 1H 2026, deal counts fell sharply–quarterly global count and outbound count hit decade lows.
– The widening strategic-sponsor gap: Since Q4 2025, strategic deal value has risen precipitously even as financial deal value has fallen. The gap widened significantly in Q2 2026, with strategic activity increasing 31% quarter-over-quarter and sponsor deal value declining 9%.
Strategic buyer deal value rose by 11% in June over the prior month to more than $560 billion, and year-over-year strategic value is up 84%. In contrast, financial buyer deal value shrunk 8% from May to June to fall below $100 billion. The report says that June represents the third consecutive month that sponsor activity has declined, although year-over-year sponsor deal value is up 18%.
Fenwick and Carta recently released their latest “Venture Beacon,” a periodic report on the state of the venture capital market. This one covers the first quarter of 2026, and this excerpt highlights some of the report’s key findings:
Venture fundraising activity continued to recover in 2025 and into Q1 2026. Total capital raised increased meaningfully from 2023 lows, continuing the broader recovery trend that began in 2024. Series D+ financings continued to represent a meaningful portion of total dollars invested, reflecting continued strength in later-stage financings.
Valuations continued trending upward across financing stages. Median Seed and Series A pre-money valuations reached record highs in 2025, while Series B, Series C, and Series D+ valuations continued rebounding from the declines experienced in 2022 and 2023. Year-over-year valuation growth remained positive across all major financing stages in both 2024 and 2025.
The gap between top-performing companies and the broader market widened. The spread between median and top-quartile companies expanded further in 2025. At the Seed stage, the gap between the 50th and 90th percentile valuations increased materially. Series A financings showed a similar trend, with the top 90th percentile valuations experiencing significant growth relative to 75th percentile and below.
The report also found that in an environment where fundraising conditions continued to stabilize, AI-related companies were the big winners, attracting a record 61% of all venture dollars raised during the first quarter. Hardware, crypto/web3, gaming, and AI-related companies enjoyed the highest valuations and largest median raises, while healthcare, biotech, consumer, and edtech companies generally came in at lower valuations and engaged in smaller fundraising rounds.
[T]he Delaware Court of Chancery held that, following a post-merger purchase-price adjustment that benefited the seller, the buyer may still receive indemnification from the seller for that adjustment payment if the adjustment was caused by a misrepresentation in the agreement or a warranty breach. The case shows that the Delaware courts recognize that contractual purchase-price adjustments and contractual indemnification processes are not mutually exclusive, but they can complement each other in a way that allows the processes to proceed according to their terms while effectuating the commercial intent of the parties.
Here are the facts as summarized by Sidley. There were a few issues and challenges leading up to this dispute, so buckle up.
The buyer acquired the seller in 2019 for a $750 million base purchase price, subject to a post-closing purchase-price adjustment based on whether certain accounting metrics at closing exceeded or fell short of agreed-upon targets. One such metric was “tangible net worth” — which the parties agreed would be determined in accordance with GAAP’s revenue recognition standard: ASC 606. Although the standard was new at the time, the seller represented that it had already been adopted and would have an immaterial impact on its pre-closing financials.
The merger agreement also naturally contained financial-statement representations. Among other things, the seller represented that its financial statements were prepared in accordance with GAAP and fairly presented, in all material respects, the company’s financial condition and results of operations. And as part of the post-closing purchase-price adjustment, the merger agreement also required that the estimated balance sheet and tangible net worth calculations be prepared in accordance with agreed accounting principles, which specifically required application of ASC 606.
After closing, it became known that the seller had misapplied ASC 606 in its pre-closing financials. Correcting that treatment produced a different tangible net worth adjustment by approximately $38.3 million, compared to what the buyer would have paid without the correct application of ASC 606. Thus, the seller sought a purchase-price adjustment. In response, the buyer filed a complaint in the Delaware Court of Chancery seeking a declaration and injunction to prevent the seller from asking the designated accountant to calculate the “Final Adjustment Amount” using an application of ASC 606 that was inconsistent with the pre-closing financial statements. The court reasoned that the parties’ agreement required ASC 606 to be applied correctly and, thus, the agreement did not prohibit the seller from asking the accounting firm to calculate the Final Adjustment Amount.
Given the concededly incorrect application of ASC 606, the outcome in the purchase-price adjustment process was that the buyer was obligated to pay the extra $38.3 million to the selling shareholders. Following the accounting proceeding, the buyer filed a new lawsuit, this time for indemnification. The buyer alleged that it overpaid the Final Adjustment Amount due to the seller’s breach of representations and warranties regarding the accuracy of its financial statements.
Ultimately, Vice Chancellor Fiorvanti held that the seller breached the merger agreement representation that its financial statements were prepared in accordance with GAAP and its estimated balance sheet obligations for the purchase-price adjustment provision. Seller tried to argue that the no-duplication provision prevented the claims. VC Fiorvanti disagreed since the no-duplication provision was intended to prevent double recovery, not bar indemnification claims generally, and that buyer proved that, if seller had applied GAAP correctly in the pre-signing and interim period, buyer would have avoided the entire $38.3 million upward adjustment. Sidley concludes:
Golden Rule teaches that while a purchase-price adjustment settles the final price, it does not decide who bears the risk that a representation was false or encroach on the purpose of indemnification. Absent language making the adjustment the exclusive remedy, a broadly drafted indemnity paired with a no-duplication provision aimed at true double recovery can provide a buyer a path to recovery where the adjustment payment itself is traceable to a breached representation, warranty, or covenant.
Earlier this week, the FTC announced a proposed settlement involving record fines ($12 million) for a failure to make a mandatory filing under the HSR Act. Here’s information from the announcement:
Under the terms of a proposed final judgment, Edwards, including former Genesis subsidiary JC Medical, will pay a $10 million penalty. Genesis will pay a $2 million penalty. Edwards will also be subject to additional terms including prior notice requirements. The combined $12 million penalty is the largest ever for failing to make an HSR filing [. . .]
According to the complaint, Edwards and Genesis intentionally structured their deal to avoid complying with the HSR Act, which requires parties to submit an HSR form to the federal antitrust agencies and observe a waiting period before completing a transaction. The waiting period provides the antitrust agencies with time to evaluate the transaction for potential competitive harm.
In July 2024, Edwards acquired JC Medical without filing under HSR and then, just one day later, attempted to acquire JC Medical’s only competitor, JenaValve Technology Inc. Had the transaction succeeded, Edwards would have owned the only two companies in the United States with TAVR-AR devices in clinical trials.
The FTC sued to block Edwards’ acquisition of JenaValve alleging that the deal was anticompetitive and, in January 2026, the U.S. District Court for the District of Columbia granted the FTC’s request for a preliminary injunction after a six-day hearing.
As you can tell from the above, the FTC alleged that avoidance tactics were used here. The announcement goes on to say:
According to the complaint, Edwards was concerned that HSR review would significantly delay closing on the acquisition of JC Medical, especially in light of its concurrent negotiations to acquire JenaValve.
To avoid HSR review, Edwards and Genesis agreed that Edwards would pay $115 million, plus milestone payments, for JC Medical, which fell just below the minimum size-of-transaction threshold of $119.5 million required at the time to trigger HSR review. Edwards, however, also agreed to a contemporaneous $25 million investment in Genesis in connection with the JC Medical acquisition, according to the complaint.
In substance, the transactions between Edwards and Genesis met the thresholds for mandatory reporting under HSR, as the combination amounted to more than $119.5 million, the complaint further alleges.
This Fried Frank article discusses the Delaware Chancery’s early July decision in WSP USA Services Inc. v. Versar, Inc. (Del. Ch.; 7/26), granting a motion to dismiss claims by a seller that the buyer breached their SPA by treating an undisclosed current liabilities disagreement as a purchase price adjustment dispute rather than a breach-of-representations dispute. The article summarizes the facts as follows:
In 2023, Versar (“Buyer”) acquired facility management company Louis Berger Services, Inc. (the “Company”) from WSP USA Services, Inc. (Seller”). Post-closing, Buyer alleged that the Company had not materially performed certain of its government contracts (the “Florida Contracts”). Seller had represented in the SPA that the Company had materially complied with and performed all of its government contracts. Under the post-closing purchase price adjustment process set forth in the SPA, Buyer proposed a purchase price adjustment of about $9.7 million, of which about $5.3 million was attributable to the alleged nonperformance of the Florida Contracts.
Seller did not argue that liabilities associated with underperformance of the Florida Contracts were not current liabilities within the SPA’s definition of “Net Working Capital”—but Seller argued that the SPA prohibited Buyer from treating the dispute over the Florida Contracts as the basis for a purchase price adjustment. Seller argued that the proper source of recovery was through the R&W insurance, given the representation in the SPA covering compliance with government contracts. Seller brought suit, claiming that Buyer breached the SPA by submitting the dispute to the SPA’s independent arbiter process for Net Working Capital disputes.
Chancellor McCormick disagreed and found that, because the SPA lacked a provision dictating a “hierarchy” of the post-closing remedies (the purchase price adjustment and R&W insurance recovery), the buyer was able to choose between them. The Fried Frank alert says:
The decision reinforces the need for careful drafting of post-closing purchase price adjustment and indemnification provisions. Where, as is typical, a purchase agreement (i) provides for a post-closing purchase price adjustment based on net working capital (or another metric), and (ii) requires that the seller indemnify the buyer for breaches of representations and warranties (or that the buyer obtain an R&W insurance policy to cover such breaches), the buyer may be entitled to elect between seeking recovery under (i) or (ii) if a post-closing dispute falls within the purview of both—unless the parties have specified in their agreement a “remedy hierarchy” stating that, in case of conflict between the two provisions, one would supersede the other. We note that these two remedies typically provide for different recoveries, particularly as indemnification usually is subject to caps and deductibles.
It goes on to suggest:
Drafters of purchase agreements should consider specifying a “remedy hierarchy” as between a purchase price adjustment and indemnification. Where a purchase agreement provides for (a) a purchase price adjustment based on net working capital (or other metric) and (b) indemnification (or recovery under R&W insurance) for breaches of representations, the drafters should consider specifying, with respect to disputes that implicate both, which remedy supersedes the other.
Drafters should consider carefully how the purchase price adjustment provisions interrelate with the indemnification provisions. Typically, an agreement will: specify that indemnification is the exclusive remedy for breaches of the seller’s representations under the agreement; carve out purchase price adjustment amounts (as well as fraud and other specified matters) from the exclusive remedy provision; and prohibit double recoveries by excluding purchase price adjustments from indemnification claims. Many agreements provide that a purchase price adjustment is the sole remedy for net working capital inaccuracies and that indemnification is the sole remedy for breaches of representations and warranties—but, as noted, the agreement should specify which of these remedies takes precedence over the other when the dispute falls under both. For additional clarity, parties could consider providing specific, hypothetical examples of how they intend that specific situations would be treated where both a post-closing purchase price adjustment and indemnification could be implicated.
– Forty-one Second Request investigations were opened, and 18 transactions were contested by the Agencies, both down from fiscal year (FY) 2024. But certain industries, including agriculture and food, housing, electricity, and healthcare, remain priorities for the administration.
– Consent orders/decrees have returned as a viable pathway to closing a transaction with a negotiated remedy.
– The trend of increasingly large transactions, in excess of $1 billion, has continued.
– There were 2,006 Hart-Scott-Rodino Act (HSR Act) reportable transactions noticed, a number relatively flat year over year. Early Termination was reintroduced in February 2025, and it was granted for 29 percent of Early Termination requests across the entire year – a sizable increase year over year but still well below the 70+ percent grant rate that was typical before FY 2021.
Yesterday, Corp Fin issued a grab bag of new CFIs addressing beneficial ownership reporting, the proxy rules, Regulation Crowdfunding & the tender offer rules. Here are links to the CFIs, along with a brief description of what’s addressed in them:
Exchange Act Sections 13(d) & 13(g)
Section 105. Rule 13d-3 — Determination of Beneficial Ownership
New Question 105.08 – Cash-based total return equity swap (TRS) generally does not result in beneficial ownership of reference securities or plan or scheme to evade reporting.
New Question 105.09 – When a TRS swap will result in beneficial ownership of reference securities.
New Question 105.10 – Mental state required for a “plan or scheme” to evade reporting & application to a TRS.
Section 110. Schedule 13D
New Question 110.09 – Disclosure of identity of investors in an entity filing a 13D.
New Question 110.10 – Reporting obligations for general partners of a 13D reporting person that is a general or limited partnership.
Proxy Rules and Schedules 14A/14C
Section 155. Item 4
New Question 155.02 – Status of investors in an entity conducting a proxy contest as “participants” in a solicitation.
New Question 104.03 – Circumstances under which an issuer may use a widely disseminated press release to “publish, send, or give” the disclosure required by Rule 13e-4(d) to security holders.
New Question 131.04 – Circumstances under which a bidder may use a widely disseminated press release to “publish, send, or give” the disclosure required by Rule 14d-6 to security holders.