Remedies for M&A Breach of Contract – The Cineplex Case

By: Jonathan Chan & Martin Petrin (CLS Blue Sky Blog)

A remorseful acquirer wants to get out of a merger or acquisition agreement. It concocts a thin justification, which a court wisely rejects, finding unlawful breach. What is the appropriate remedy for harm done to the target?

While attention has focused on the controversy surrounding Elon Musk’s proposed acquisition of Twitter, this question arose in the recent Canadian decision of Cineplex v. Cineworld.[1] The Cineplex court rejected specific performance and instead, in a case of first impression, awarded the target CAD $1.24 billion in expectation damages for loss of anticipated synergies.

Our forthcoming paper takes a close look at remedies for M&A breach of contract, both in the specific context of Cineplex as well as M&A disputes in Canada and the U.S. generally.

We argue, first, that specific performance – currently sought by Twitter in Delaware – will often be the most suitable remedy. Second, if the remedy for breach of a merger or acquisition agreement between a buyer and target consists of damages, we suggest that they should not be calculated on the basis of lost synergies. Rather, we argue that loss of consideration to target shareholders is also the most reliable measure of the target’s own damages…