Hacker News Reader

Comment by csours | Hacker News Reader

Quoting from Matt Levine:

> That is a good little window into mergers-and-acquisitions lawyering. SoftBank’s agreement with WeWork isn’t public, but presumably it says something like “SoftBank can cancel the tender if there are any material government restrictions on WeWork’s business,” but it doesn’t say something like “SoftBank can cancel the tender if lots of customers cancel their WeWork memberships.” The very rough general rule in mergers and acquisitions is that if business conditions get worse, that’s the acquirer’s risk, but if there is some legal problem with the business then that’s the seller’s risk.

Emphasis mine

View on HN

There are quite a few of those M&A contracts that contain clauses against the business conditions getting worse outside certain bands and some that allow withdrawal for exactly that: changing market conditions. Without the text of the contract there isn't much to say about any of this.

From the article:

> the co-working company and SoftBank agreed to a set of performance milestones that WeWork agreed to meet in exchange for the secondary liquidity. Such terms are customary in most financial transactions... SoftBank in its statement last week said that WeWork failed to meet a number of those performance requirements, and said that it was within its rights under the tender offer contract to walk away from the deal.

That's true but they may be able to cancel the contract based on a force majeure clause because of the global pandemic.

Or a government restriction due to the pandemic, if not the pandemic itself.

As Frere Jacques notes, it is almost pointless to speculate without the actual contract in hand.

For instance, large events often have cancellation insurance, but they have found that the terms are much narrower than they expected when they signed the insurance contract.

> but it doesn’t say something like “SoftBank can cancel the tender if lots of customers cancel their WeWork memberships.”

There's a squishy clause called a "material adverse effect" clause that exists in many corporate contracts, and often has precious little specificity/definition. If I had to guess (as a former lawyer), I'd speculate that an MAE clause is at least part of the justification for SoftBank's pullout.

Reply on news.ycombinator.com