Liz shared the weekend’s tariff ups and downs on TheCorporateCounsel.net on Monday and discussed some of the disclosure considerations (particularly time-sensitive for companies still finalizing 10-Ks). Tariff uncertainty may also be a particularly time-sensitive issue for M&A practitioners trying to figure out not only what the SCOTUS decision — but also the Administration’s announcement of Section 122 tariffs of 15% — means for their deals.
For detailed legal coverage of the weekend’s developments, check out this Eversheds Sutherland alert. It warns (citing the dissent) that the resulting refund process could be a “mess” and that all the trade deals are now in an uncertain state as a result of the decision. What the possible refund “mess” might look like is still unclear (although we’ve now seen at least one complaint filed for refunds). Here’s more from the alert:
The CIT will now be responsible for determining the scope of appropriate relief and the procedures for its administration. There is little doubt that the CIT will authorize or recognize the general rights to a refund – given the underlying illegality of the tariff collected. Indeed, in requesting a stay of the original decisions against the imposition of IEEPA tariffs, the Trump Administration conceded that refunds would be paid with interest if the IEEPA tariffs were ruled to be illegal. Specifically, in a filing with the US Court of Appeals for the Federal Circuit on May 29, 2025, the Department of Justice stated that “[i]f tariffs imposed on plaintiffs during these appeals are ultimately held unlawful, then the government will issue refunds to plaintiffs, including any post judgment interest that accrues.” Until the Administration or CIT provide additional guidance, it is unclear how such tariff refunds will made and what steps importers will be required to take to request any refunds. The process could involve the use of existing administrative Customs tools (post-summary corrections and protests), filing lawsuits with the CIT, or a new specified avenue. Importers therefore should gather documentation to support any such refund requests and should, in the interim, take all appropriate steps to perfect their refund requests under existing rules and procedures.
– Download relevant data from CBP’s Automated Commercial Environment portal for entries made under IEEPA tariff codes. Relevant information includes entry numbers, dates, and the specific amounts of IEEPA duties paid;
– File an action in the CIT covering all entries where IEEPA duties have been paid; and
– File protective protests with CBP within the 180-day protest period for entries that have been finalized or “liquidated.”
As far as the impact on pending deals, the “good” news is that everyone has recent experience navigating this tariff uncertainty, but let’s recap some considerations. With the Trump Administration immediately announcing an alternative tariff regime and existing trade deals off the table, we don’t know whether the new Section 122 tariffs will be extended past their 150-day maximum, if another avenue will be pursued, or if other deals will be negotiated. That means renewed challenges for: financial forecasts and valuations; trade and supply chain due diligence;allocation of risks associated with any new tariffs in purchase agreements; and tariff-related exclusions to RWI policies — plus the increased risk of post-closing disputesthat comes with uncertainty and complexity. For refunds, the Greenberg Traurig update says parties may want to specify which party is entitled to refunds attributable to pre-closing period tariffs, rather than rely on standard post-closing tax covenant provisions, and address which party has the obligation to collect, the level of efforts that must be applied, how long to pursue and whether the collection costs may be set off.
After the US District Court for the Eastern District of Texas vacated the final rules implementing the FTC & DOJ’s overhaul of the HSR reporting regime that went into effect last year, the FTC filed — and the district court swiftly denied — an emergency motion for stay. But the FTC also filed an emergency motion for stay pending appeal, which the Fifth Circuit granted late last week. This Fenwick alert says that the case schedule has briefing on the underlying motion complete by February 26. It also shares these key takeaways and recommendations:
– Parties with transactions requiring HSR notifications should, for now, continue to prepare those filings under the new rules and use the new form.
– The rules at issue only affect the amount and kind of information that must be included in a party’s filing. They have no impact on which transactions are subject to HSR requirements.
– If the HSR requirements revert to the rules in effect prior to February 10, 2025, deal parties may face significantly less time and expense in preparing their filings, with corresponding benefits to overall deal timelines.
The January-February issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– So, You Think You Can (Deal) Jump?
– Delaware Chancery Litigation Over Continuation Vehicle Transaction Highlights Considerations for GP-Led Secondaries
– Just Announced: The 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
According to the most recent edition of EY’s Private Equity Pulse, PE sponsors are optimistic about the environment for many long-delayed exits of portfolio investments in 2026:
Exit momentum also began to reassert itself in 2025, allowing long-deferred liquidity plans to move forward. This was underpinned by the more constructive macro backdrop, improving financing availability and a recovery in buyer confidence, especially amongst corporate acquirors.
Trade sales, which had been broadly flat through 2023 and much of 2024, inflected sharply higher last year. These were the result of significant pent-up strategic demand and greater conviction at the board level to deploy capital.
In aggregate, PE firms announced US$481b of sales to strategics, representing an increase of 26% by volume and more than 75% by value. Activity was particularly pronounced in sectors where scale, technology and operational capabilities were viewed as critical competitive differentiators. Going forward, GPs expect continued strength in the channel, rating it the most important likely exit route for next year.
EY says that secondaries continued to play a big role in exit activities in 2025, and with more than $1.6 trillion in dry powder available for deployment, sponsor-to-sponsor deals are expected to continue to feature prominently in this year’s exits. While the IPO route has been challenging in recent years, EY points to improving momentum during the second half of 2025 as a potential harbinger of good news for 2026.
In a recent article on the use of Gen AI tools in M&A, McKinsey channeled its inner Kent Brockman to sing the praises of our new AI overlords. Here’s the article’s intro:
That didn’t take long. In 2024, the opportunities to apply gen AI to M&A deals were just emerging, and dealmakers were focused on learning about potential use cases. But since then, the number of gen-AI-enabled tools and capabilities on the market has exploded. In a survey we conducted last year, the respondents who say they are using gen AI in their M&A activities report an average cost reduction of roughly 20 percent. Forty percent of respondents report that gen AI enabled 30 to 50 percent faster deal cycles. Of all respondents, 42 percent say they believe gen AI has the potential to transform or to bring highly differentiating capabilities to the deal process.
Although excitement about gen AI is high and users report compelling results, our survey also finds that only 30 percent of respondents engage with gen AI at moderate to high levels. Even among avid users, the large majority of respondents currently rely on commercially available gen AI chatbots, not customized, proprietary tools. Respondents across industries and company sizes identify a lack of expertise as their main challenge to AI adoption.
The article acknowledges that it may be tempting, given how fast these tools are advancing, for M&A teams to sit on the sidelines for now, but the authors suggest that they jump in with both feet:
[T]eams can benefit by recognizing what tools are already on the market and how companies are currently using them to identify M&A targets, accelerate diligence, and augment integration planning and execution. By engaging with the current tools and understanding how they are evolving, M&A teams can develop the necessary documentation, inputs, and systems they will need when the next wave of innovation arrives.
Gen AI is moving fast, and forward-thinking M&A practitioners are already embracing it. The next era of M&A will be defined by teams that don’t wait on the sidelines but learn to surf the gen AI wave as it gains speed.
The accuracy and completeness of many representations and covenants in an acquisition agreement are often qualified by phrases like “in all material respects” or “except where the failure to be accurate or complete would have a material adverse effect” on the target. In certain situations, the agreement calls for a “materiality scrape” to be applied. In effect, a materiality scrape removes the materiality qualifiers attached to a rep for specific situations – usually closing conditions or indemnity rights – arising under the agreement.
A recent Mayer Brown memo on the Delaware Superior Court’s decision in JanCo FS 2 v. ISS Facility Services, (Del. Super. 8/25), points out that the Court applied a contractual materiality scrape to an absence of changes rep in a way that many lawyers may not have expected, which resulted in a negative outcome for the seller. This excerpt explains the Court’s approach:
The buyer alleged that the seller breached the absence of changes representation, which provided in relevant part:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not: [(1)] suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, a Material Adverse Effect on the Target Accounts; [or] [(2)] suffered or experienced any other event or circumstance which has resulted in a Material Adverse Effect on it [sic] or which is reasonably expected to result in such a Material Adverse Effect.
In analyzing the absence of changes representation, the Court cited Delaware Chancery Court precedent for the proposition that a defined term incorporates the entire definition and stated that the “proper order of operations” is to (1) replace the defined term “Material Adverse Effect” with the text of the entire definition of Material Adverse Effect and then (2) employ the materiality scrape to remove the materiality qualifiers from the text of the definition of Material Adverse Effect.
What happened when the Court applied this “order of operations” to the rep in question? Check this excerpt out:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not: [(1)] suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, a Material Adverse Effect any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material an adverse effect on the Target Accounts.
Yikes! The Court performed the same operation on the second clause of the rep, which addressed the absence of adverse changes in the target’s purchased assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations or to the ability of any party to consummate timely the transactions contemplated by the agreement.
Naturally, the seller complained that Court’s application of the materiality scrape made the representation overly broad, but the Court pointed out that the basket and cap provisions of the agreement both limited the seller’s indemnification exposure and served as evidence that the parties’ didn’t intend for the buyer to have to prove a material adverse effect in order to obtain indemnification.
The article goes on to recommend some practice pointers in light of the Court’s decision, including a new approach to drafting materiality scrapes that pays “particular attention to the specific drafting of the materiality qualifiers (including within defined terms used in the representations), and tailor[s] the materiality scrape so that it applies to only those representations, and only in the manner, that the parties intend.”
Last Thursday, in US Chamber of Commerce v. FTC, (E.D. Tex.; 2/26), the US District Court for the Eastern District of Texas vacated the final rules implementing the FTC & DOJ’s overhaul of the HSR reporting regime which went into effect last year. Here’s an excerpt from Gibson Dunn’s memo summarizing the Court’s decision:
In Chamber of Commerce v. FTC, a coalition of business groups led by the U.S. Chamber of Commerce challenged the FTC’s 2024 Rule. On February 12, 2026, Judge Jeremy D. Kernodle on the U.S. District Court for the Eastern District of Texas granted summary judgment to the plaintiffs, holding that the 2024 Rule exceeded the FTC’s statutory authority because “the agency has not shown that the Rule’s claimed benefits will ‘reasonably outweigh’ its significant and widespread costs.”
Under the HSR Act, the FTC may request only pre‑merger information “necessary and appropriate” to assess whether a transaction may violate the antitrust laws—a standard the Court interpreted as requiring a reasonable cost‑benefit analysis. The FTC failed to meet that requirement. Although the FTC acknowledged that the 2024 Rule would nearly triple filing time—from 37 to 105 hours—the Court found the FTC could not substantiate the benefits it claimed the changes would produce. For example, the FTC was unable to identify a single illegal merger in the 46‑year history of the prior form that the new form would have prevented. The Court rejected the FTC’s argument that the 2024 Rule would conserve agency resources, noting that any efficiency gains would accrue only in the roughly 8% of transactions the FTC investigates, while all filers would bear the increased compliance burden.
Judge Kernodle also ruled that the 2024 Rule is arbitrary and capricious because the FTC failed to consider whether the 2024 Rule’s benefits “bear a rational relationship” to its costs and the FTC “did not adequately explain its rejection of less costly and burdensome alternatives,” such as targeted voluntary submissions or more focused Second Requests.
The Court vacated and set aside the 2024 Rule but stayed its decision through February 19, 2026. During this period, the FTC may choose to appeal or allow the prior HSR reporting rule to take effect.
The memo says that the rule will likely remain in effect during the appeal process, but if the FTC doesn’t appeal by February 20th, the premerger notification requirements will revert to the prior HSR reporting rule on that date. We’re posting memos in our “Antitrust” Practice Area.
In Monica, et al. v. Delta Data Software, Inc.(Del. Super.; 2/26), the Delaware Superior Court denied a motion to dismiss claims that a buyer breached the covenant of good faith and fair dealing by undermining the collection of a customer payment to avoid an earnout. The case arose out of the purchase of Phoenix Systems by the defendant, Delta Data Software. Plaintiffs were entitled to an earnout payment conditioned on annual recurring revenue (ARR) for any contract that met certain conditions, including that an initial payment was made under the contract prior to March 31. Following the closing, one plaintiff served as Delta Data’s VP of Business Development and negotiated a contract with a new customer, requiring an initial payment by March 29. However, in what plaintiffs allege was an affirmative act for the purpose of avoiding the earnout, Delta instructed the new customer not to pay the invoice. The new customer contract would have met the conditions to be included in the earnout, but for the payment being received after March 31. The threshold ARR was not met.
The court found that the plaintiffs pleaded that there was a contractual gap for the implied covenant to fill (related to payment collections) and sufficient facts to allege a breach.
The SPCA provides an Earnout Payment conditioned on, among other things, when initial customer payments are made. For those payments to be made, Defendant had to collect, or at least accept, them. Defendant agrees that the SPCA “is silent” on the issue of how it was required to act when collecting payments and emphasizes that the SPCA contains no “efforts” clause in that regard. There is thus a “gap” regarding the range of actions Defendant either must or is prohibited from taking when it comes to collection of payments.
Beyond pleading a gap, Plaintiffs plead an implied obligation that Defendant breached. The complaint pleads that Defendant took affirmative acts to prevent the Customer from making payment on the MSLA for the purpose of undermining Plaintiffs’ right to an Earnout Payment. Specifically, Plaintiffs plead, after Delta Data had already invoiced the Customer for payment due on March 29, 2025, Defendant “t[old] the customer that it would void the invoice and that the Customer did not need to pay.” The complaint alleges that Defendant took this action for the purpose of “manipulat[ing] 2024 ARR,” thus undermining Plaintiffs’ right to an Earnout Payment. Plaintiffs also plead that Defendant terminated Monica “to ensure that he could not participate in the performance of Delta Data’s contract with the Customer and the collection of the Customer’s first payment.”
The parties agreed to an Earnout Payment contingent on Delta Data receiving certain customer payments prior to March 31, 2025. When Plaintiffs entered that agreement, it was reasonable for them to expect at least that Delta Data would not take affirmative acts to avoid receiving customer payments by that date. By pleading that Delta Data took such acts for the purpose of undermining the Earnout Payment, Plaintiffs allege a breach of the implied covenant.
The court also refused to dismiss the breach of contract claims — despite plaintiffs’ acknowledgement that the earnout was not met — under the prevention doctrine since plaintiffs allege that defendant’s own conduct prevented the earnout payment threshold from being met.
Yesterday, the SEC’s Division of Corporation Finance issued a handful of new CDIs relating to Form S-4, Going Private Transactions and Tender Offers. Below are summaries and links to the full CDIs.
Securities Act Rules FormsRevised 225.03 (redline) permits using a business combination Form S-4 to register for resale the securities previously offered and sold to officers, directors, and affiliates of the target company in connection with the business combination transaction pursuant to an exemption (e.g., in connection with written consents or lock-up agreements per recently updated Securities Act Sections Questions 139.29, 130.30, and 239.13).
Going Private Transactions, Exchange Act Rule 13e-3 and Schedule 13E-3New Question 112.03 provides that the Rule 13e-3(g)(2) exception to Rule 13e-3’s requirements for going privates is available if the class of equity securities is not listed on a national securities exchange at the time the transaction is announced but the registration and approval for listing (or authorization to be quoted in an inter-dealer quotation system) are express conditions to closing, disclosed as such and all other conditions of the exception are satisfied. Revised Question 212.01 (redline) has been revised accordingly.
New Question 112.04 provides that Rule 13e-3 would generally not apply to transactions where there is an express non-waivable condition in the tender offer that the issuer would not purchase an amount of subject equity securities that would have a reasonable likelihood or purpose of producing any of the effects described in Rule 13e-3(a)(3)(ii) (e.g., causing the class of subject equity securities to become eligible for termination of Section 12 registration under Rules 12g-4 or 12h-6 or causing the suspension of Section 15(d) reporting obligations under Rule 12h-3.)
Tender Offer Rules and SchedulesNew Question 101.22 provides that a parent company’s tender offer for Section 12 registered equity securities issued by its affiliate is subject to Section 14(d) and Regulation 14D and exempt from Rule 13e-4 by virtue of Rule 13e-4(h)(4). Section 14(d)(8)(B)’s exception for tender offers by “the issuer of such security” is not available for any affiliates of the issuer other than a 100%-owned subsidiary of the issuer.
New Question 163.02 provides the staff will not object to an issuer’s failure to comply with the 10 business day requirement of Rule 14e-2 if the issuer was unaware of the existence of a third-party mini-tender offer and the issuer publishes, sends, or gives to security holders the required statement as soon as possible after it becomes aware.
In September, we shared the SEC’s notice and request for comment for a proposed change to Nasdaq’s rules applicable to initial listings for de-SPAC transactions to align the treatment of OTC trading SPACs with similarly situated exchange-listed SPACs. In early December, the SEC posted a notice of amendment and an order granting the accelerated approval of the proposed change, as modified. Specifically, Nasdaq’s amendment to the proposal:
– Specified that the changes only apply to a de-SPAC transaction involving a SPAC that was previously listed on an exchange and provides its public shareholders the opportunity to redeem or tender their shares in connection with the deSPAC transaction in exchange for a pro rata share of the IPO proceeds and concurrent sale by the company of equity securities;
– Addressed a commenter’s suggestion for a technical revision regarding the proposed rule language for the timing of the effectiveness of a registration statement as it relates to the listing of a company in connection with a de-SPAC transaction; and
– Made minor technical changes to improve the structure, clarity and readability.