In Ipsos S.A. v Dentsu Aegis Network Limited (previously Aegis Group plc) [2015] the High Court was asked to interpret a material adverse event (MAE) clause in a share purchase agreement. Ipsos claimed damages for loss resulting from Aegis’s fraudulent misrepresentations in respect of the forecasts on which Ipsos had relied and upon which the purchase price was based. Ipsos also claimed damages for breach of contract based on Aegis’s failure to notify Ipsos of the poor performance of the target company. By completing the transaction Ipsos alleged a loss of between £134 million and £232 million. Aegis had applied to strike out the claim or alternatively for summary judgment.


Aegis sold to Ipsos companies in the Synovate Group, a worldwide market-research business, for

£528.8 million, under a share purchase agreement dated 26 July 2011 (SPA). The purchase price was based on the application of a multiplier of ten to the forecast underlying operating profit of Synovate for 2011 which, at the date of the SPA, was £52 million. The SPA provided for a split exchange and completion to allow for shareholder consent and certain clearances to be obtained.

The SPA included the following:

  1. a completion condition that no MAE had occurred between the Signing Date [of the SPA] and the MAE condition date [30 September 2011];
  2. clause 4.10 by which each party undertook to notify the other within two business days of:

“… first becoming aware of any fact, matter or circumstance, which is reasonably likely to give rise to an ability for the purchaser to rely on a completion condition”;

  1. MAE was defined as:

“an act or omission, or the occurrence of a fact, matter, event or circumstance, affecting [Synovate] 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 [Synovate] taken as a whole but excluding any of the foregoing: (i) which has occurred prior to the Signing Date;… [other specified exceptions]”;

  1. warranties given by Aegis, including that, as at the Signing Date:

“there has been no material adverse change in the financial or trading position of [Synovate] taken as a whole since 31 December 2010 [the Accounts Date]”; and

  1. a provision limiting Aegis’s liability, whereby Ipsos acknowledged and agreed that Aegis:

“does not give or make any warranty as to the accuracy of forecasts, estimates, projections, statements of intent and statements of honestly expressed opinion provided to [Ipsos] on or prior to the Signing Date”.

Taken together, the effect of these provisions was that completion was conditional on an MAE not occurring or Ipsos waiving the MAE. If that condition was not satisfied or waived by Ipsos, then by clause 20.2:

“… either party may by notice in writing to the other party terminate this Agreement”.

Ipsos’s Claim

Ipsos’s claim was based on the MAE provisions in the SPA, which applied to the period (broadly) between exchange and completion. As part  of the due diligence exercise, Ipsos was provided with financial information about the Synovate business, including the forecast operating profit for 2011 of £52 million, upon which the purchase price was based. However, Aegis withheld some available financial information from Ipsos. The withheld information included mid-month ‘flash’ results produced  in September 2011, which showed sales and revenues to be significantly behind the forecasts, and a revised central forecast, which showed a substantially reduced operating profit for 2011. The actual results for September 2011 disclosed sales, gross revenues and operating profit materially behind the forecasts and, again, these were withheld.

Ipsos claimed that Aegis had made express and implied representations relating to the 2011 forecasts, which were false as the forecasts provided to Ipsos did not remain the best estimates for 2011 and that Aegis was aware of or was reckless as to the falsity of the representations. Ipsos claimed that if it had been provided with the withheld information, it would have invoked the MAE completion condition and would not have completed the transaction for £528.8 million. It also claimed that Aegis was in breach of its contractual obligation in clause 4.10 of the SPA to notify it of any fact, matter or circumstance, which is reasonably likely to give rise to an ability for Ipsos to rely on a completion  condition.

Ipsos relied on the following as acts, omissions, facts, matters, events or circumstances as being within the meaning of the definition of MAE:

  • the extremely poor sales and revenue performance in September 2011 (sales down by 24% and revenue down by 17.7%, each as compared to the forecast);
  • the drop in operating profit for September 2011, being a reduction of 84.6% against the forecast;
  • the downward revisions in the forecasts for 2011 made by management in September 2011, which showed a reduction in  gross revenue of US $49.9 million and in operating profit of US $27.8 million as compared to the forecast provided to Ipsos.

Ipsos argued that sales, revenue and operating profit being worse than forecast and management making downward revisions to its forecasts in the period between exchange and completion were within the MAE definition. Each of these matters gave rise to, or was likely to give rise to, an effect on the business operations, assets, liabilities, financial position or results of operations of Synovate taken as a whole that was both adverse and material. The material adverse effect was reflected in the fact that the actual full-year profits were only £20.8 million, a reduction of some £31 million. On this basis it had pleaded an arguable case that should not be struck out.

Aegis’s Defence

Aegis argued that the warranties it gave effected an allocation of risk between the parties. Ipsos took the risk that the state of the business at the date of the contract was not as it expected it to be when it committed itself to the sale and to that extent “caveat emptor” applied. It relied in part on the limitation on its liability provision that no warranty or representation was given by Aegis as to the accuracy or achievability of the forecasts.

Furthermore, the forecasts did not fall within the definition of a MAE for the purpose of the SPA.

MAE Discussion

It was common ground that a MAE clause had two constituent elements:

  • firstly, it must be “an act or omission or the occurrence of a fact, matter, event or circumstance”;  and
  • secondly, it must have a causal effect, “affecting [Synovate] 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 [Synovate] taken as a whole…”.

Aegis argued that:

  • in order for an act or omission, etc to fall within the definition of a MAE, it must not have occurred prior to the Signing Date. This comes from exclusion (i) of the definition of a MAE (see above). Unless Ipsos could prove that the act, omission etc falls within the definition, including the exclusions, it had failed to make out a case. It is not enough that sales “fell off a cliff” in September 2011. It would be necessary to demonstrate that the cause of this happening was not attributable to facts within the MAE definition’s exclusions, particularly the exclusion relating  to events prior to the Signing  Date; for example, the loss of a major customer prior to the Signing Date;
  • a drop in sales, revenue and profits cannot in itself fall within the definition of a MAE because that definition requires an act or omission, or the occurrence of a fact, matter, event or circumstance. This requires a clearly identified single act, omission, etc and not a combination of unidentified acts. A decline in the trading position of Synovate would not be sufficient; •    
  1. e Ipsos purchased the business as it was on the Signing Date and Aegis gave no warranties as to its performance during the short period before completion, it would be wrong to adopt a construction of the MAE provision which would enable Ipsos to terminate the contract, or, as in the damages claim, would result in a massive diminution in the price it agreed to pay. The risk was properly balanced in the warranties, and should not be re-opened.

Ipsos argued that:

  • since the question is whether the act, omission, etc has an effect on the operations of the group “taken as a whole”, it is artificial to suggest that the sales position as a whole cannot be taken into account;
  • as one of the specified exclusions in the MAE definition was “any seasonal fluctuation in sales or earnings that are consistent with the past operating history of [Synovate]”, this showed by inference that a disastrous drop  in sales not attributable to a seasonal fluctuation would come within the MAE definition;
  • there was no sensible basis on which the fact of Synovate’s disastrous sales and profits performance in 2011 did not constitute a MAE.

Court’s Decision on the Revised Forecasts

Blair J said that:

  • he did not consider that the revision of forecasts falls naturally within the words “act or omission or the occurrence of a fact, matter, event or circumstance” as a forecast is a prediction of future events, which may turn out to be supported or falsified by subsequent events;
  • things may follow from the revision of the forecast, but this has to do with what underlies the revisions, rather than the fact of the revision itself;
  • he accepted Aegis’s submission that Ipsos’s construction was not in accordance with commercial sense. Although Ipsos agreed that Aegis did not give any warranty as to the accuracy of forecasts provided to it on or prior to the Signing Date, Ipsos’s construction of the MAE resulted in substance to a warranty in respect of the forecasts given after the Signing Date. In substance, if not in form, Ipsos was seeking to treat the forecasts as warranted and the downwards revision as giving rise to a right to terminate or a damages claim.
  • including forecasts within the MAE definition would create uncertainty, which is highly undesirable in the M&A market.

The Court held that Ipsos’s case in relation to the revised forecasts was not arguable and its claim was struck out.

Court’s Decision on Actual Performance

The Court held that the part of the claim which related to the actual financial performance of Synovate, could not be struck out at this stage as Ipsos had an arguable case in this regard.

There were within the SPA provisions that protected Ipsos in the case of a circumstance which had or was likely to have a material adverse effect on the business as a whole. In relation  to financial performance, difficult questions as to its scope may arise, which will fall to be determined against the factual matrix in the usual way. Blair J concluded that Ipsos’s case as regards actual performance in September 2011 could not be ruled out at this stage.


Material adverse change clauses are common in (amongst other scenarios) corporate sales and acquisitions where there is a split exchange and completion, in order to manage the risk of a material change in circumstances in the period between exchange and completion. However, the scope of the definition of a material adverse change clause may be difficult to ascertain and material adverse change clauses should be drafted with care given the close analysis which will be applied to the wording.

This case illustrates how the courts may seek to construe and interpret material adverse change provisions in accordance with commercial sense and that a material adverse change clause cannot be looked at in isolation from the other terms of a contract, such as whether or not warranties are being given in relation to the matter in question. The court also placed emphasis on avoiding uncertainty in the general M&A market.