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Court of Chancery Orders Buyer to Close, As Target’s Pandemic Responses (Based on Unique Facts) Did Not Breach Its Ordinary Course Covenant—Level 4 Yoga

Client memorandum | March 14, 2022

The court’s decision in Level 4 Yoga v. CorePower Yoga has been highly anticipated, as it is only the third Delaware case to have gone to trial that addresses whether the COVID-19 pandemic and related business shut-downs excused a buyer from closing an M&A agreement. In Level 4 Yoga, the court ruled that the buyer must close—because the pandemic did not constitute a “Material Adverse Effect” and the target’s pandemic responses did not breach the ordinary course covenant. However, the court’s result was based on atypical features of the transaction at issue relating to the parties’ relationship and the structure of the acquisition agreement. In our Briefing, we discuss the key points from the court’s opinion, briefly review the earlier two cases, and offer related practice points.

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