An Intervening Event, in the context of mergers and acquisitions, is an event loosely described as an event, occurrence, fact or change that materially affects the business. The “business” in the circumstance is often the target firm in a takeover situation. The event can be deemed to have an affect on the assets of the firm, such as valuation or the use of, or the operations of the firm. What is common amongst this definition in different acquisitions is that the event was not foreseen (in a reasonable context) at the time of writing to the board of directors. Most merger agreements continue by adding various exemptions to this type of event such as changes to the stock price or earnings out performance.
A common use of the Intervening Event is to allow directors to use this clause to change their recommendation of a particular offer in favor of a superior offer. This allows the board of directors to act in their fiduciary duty.
Intervening Event Example
The following text is taken from the Form SC TO-C filed with the SEC by Forty Seven (FTSV) on March 2, 2020 in relation to the proposed takeover by Gilead (GILD)
“Intervening Event” shall mean an event, occurrence, fact or change that materially affects the business, assets or operations of the Company (other than any event, occurrence, fact or change resulting from a breach of this Agreement by the Company) occurring or arising after the date hereof that was not known or reasonably foreseeable to the Board of Directors as of the date hereof, which event, occurrence, fact or change becomes known to the Board of Directors prior to the Offer Acceptance Time, other than (i) changes in the Company Common Stock price, in and of itself (however, the underlying reasons for such changes may constitute an Intervening Event), (ii) any Acquisition Proposal or (iii) the fact that, in and of itself, the Company exceeds any internal or published projections, estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, in and of itself (however, the underlying reasons for such events may constitute an Intervening Event).
In this document, the intervening event is clearly defined. It refers to ANY event that materially affects the operations of the target firm and thus have a significant effect of the profitability of the business. This in turn could have great bearing on the outcome of the proposed takeover. This description is more encompassing than a MAC clause or company material adverse effect and does not specify the subsequent action to be taken.
