In a precedential ruling, a Delaware Court has allowed Fresenius to withdraw from a $4.75 billion acquisition of Acorn Pharmaceuticals in light of a substantial change in the business structure. The ruling may affect the purchase agreements of Israeli start-ups by American companies.

Until recently, the counter-clause in M​&A transactions was considered a dead letter in commercial law. Last month, however, a Delaware District Court judge allowed German purchaser Fresenius Kabi to renege on a $4.75 billion deal to acquire generic-drug manufacturer, Akorn, and create the first precedent for the material claim of “Adverse Effect’.

Although this is an exceptional case, which includes a combination of misrepresentations that may still be reversed in the appeal court, it is expected to affect the wording of agreements in future purchase transactions.

These events are also relevant to the Israeli Hi-Tech market, since many Israeli start-ups are incorporated in Delaware, and a sizeable number of purchasers of Israeli companies are American.

Herzog Fox & Neeman’s Hanan Haviv, Partner and Head of Technology together with Hi-Tech Partner. Yuval Meidar, shed some light on the surprising ruling, saying the Delaware Court will serve as an inspiration for Israeli economic law.

Click here for the full article (in Hebrew).