The parties signed the sale and purchase agreement in July 2011.  Completion was conditional on no "Material Adverse Event" having occurred between signing and 30 September 2011.  The agreement gave the buyer the right to end the agreement if the condition was not satisfied. Each party had to advise the other on becoming aware of any matter which might entitle the buyer to invoke the condition. 

The agreement defined "Material Adverse Event" as: " act or omission, or the occurrence of a fact, matter, event or circumstance, affecting [target company] giving rise to, or which is likely to give rise to, a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of [target company] taken as a whole...".

Completion took place in October 2011. However, later the buyer brought a claim against the seller. The buyer alleged the seller had failed to comply with its notification obligation. The buyer claimed that had the seller complied, it would have invoked the Material Adverse Event condition. It would not have completed the transaction at all or would have done so at a different price.

The buyer alleged that two matters fell within the Material Adverse Event condition. The first was that the target's sales, revenue and operating profit in September 2011 were significantly worse than the seller had previously forecast.  They were down 24 per cent, 17.7 per cent and 84.6 per cent respectively against forecast. The second was that, between exchange and completion, the target's management made substantial downward revisions to its overall forecasts for 2011.

The seller applied to strike out the buyer's claim, arguing that neither of the events the buyer relied on amounted to a Material Adverse Event.


The court held that the buyer had an arguable case that the target's financial performance in September 2011 triggered the Material Adverse Event condition. However, it struck out the buyer's claim about the revisions to the 2011 forecasts, finding that the buyer had no arguable case on this point.

The court decided that the revisions of forecasts satisfied neither limb of the Material Adverse Event condition. Revisions of forecasts did not fall naturally within the words "act or omission, or the occurrence of a fact, matter, event or circumstance". Also, while it was true to say that things might follow from revising the forecasts, this was to do with what underlay the revision, not the revision itself.

The court also looked at the agreement as a whole. It noted that the buyer had expressly agreed that the seller gave no warranty about the accuracy of any financial forecasts made before signature of the share purchase agreement. Treating the revisions as a Material Adverse Event would in effect result in the post-exchange forecasts being treated as warranted, which was inconsistent. Finally, the court noted that including forecasts within the definition would produce uncertainty, which is highly undesirable in the M&A market.


This case is of interest because it is a rare for a material adverse event condition to come before the English courts.  So although the result is not surprising, the court's analysis makes interesting reading. One of the points the case brings out, like the Wood case which we also cover in this newsletter, is that the courts will have regard the agreement as a whole when interpreting a clause.

Ipsos SA v. Dentsu Aegis Network Ltd (formerly Aegis Group Plc) [2015] EWHC 1726 (Comm)