Updated: Jul 29, 2020

[Authored by Sarthak Mittal, 1st year B.B.A. LL.B. (Hons.) student at Vivekananda Institute of Professional Studies, Guru Gobind Singh Indraprastha University.]

The mankind is facing one of the biggest crises of our generation and the decisions taken by companies at this point will shape their future in upcoming times, therefore decisions taken by executives of the company becomes more crucial than ever. This makes companies reconsider their mergers and acquisitions transactions as it is a long term decision and is crucial for all the firms, as this transaction forms an alliance with another firm hence the question arises is, will the companies move forward with the pending mergers and acquisition deals and if not, then how are they going to withdraw from the same and will companies try to expand themselves by new mergers and acquisitions prospects during this pandemic.


Many of the companies look at mergers and acquisitions as an avenue to expand and grow or as a bailout package. At these tough times the executives will be more interested in investing their time, money and energy in their own company to make the business model more sustainable and adaptive.

In these times of crisis, when everyone is cognizant that there is an economic depression yet to come, will the people be consenting to invest money in new prospects? The answer is that the equity sponsors would be more inclined towards the idea of ploughing back the funds for avoiding business shock in future as there is a high probability of economic instability in future hence, the shareholders would like to save their existing portfolio companies.

The second question that arises is; will there be no mergers and acquisitions taking place these years? In response to that we have to understand that many sectors like Airlines, leisure facilities like casinos, gaming, tourism industry, auto parts and equipment and Oil and gas drilling are more affected by the pandemic, hence if there will be any company looking for expansion, they can provide a bailout package to the companies in distress or the affected companies can merge in order to benefit from collective resources. On the other hand, sectors like; health, life or multi-line insurance fields and pharmaceuticals which have been least affected by the pandemic, can amalgamate after ensuring stability of their own firms.[1]


There has been a change in economic trajectory due to the pandemic causing exorbitant loss to many business enterprises as a result many companies were forced to reconsider their various business decisions and restructure their business plans. This made many companies shrink away from the existing mergers and acquisitions deals, such as Xerox recently dropping its $34 billion offer for HP, after having postponed meetings with HP shareholders to focus on coping with the coronavirus pandemic. SoftBank has terminated its $3 billion tender offer for WeWork shares, citing the coronavirus impact together with the failure of a number of closing conditions. Bed Bath & Beyond has initiated litigation in Delaware with respect to delays in the pending sale of one of its divisions to 1-800-Flowers for $250 million. Boeing suppliers Hexcel and Woodward have called off their pending $6.4 billion merger of equal’s transaction noting the “unprecedented challenges” caused by the pandemic.[2]

The pandemic has tanked the stock values of innumerable companies due to which many of the mergers and acquisitions deals got struck down. The companies which were earlier thinking of forming an alliance with other companies have to now remodel their own business models, to make their organisation adapt to the changes in economy and also have to assess the adaptability of the other company as there may not be as many growth prospects in the company when compared to the times before pandemic.

Cross border mergers and acquisitions become more difficult due to different changes in laws by different government and also the countries have been affected by the virus divergently as some countries have been strained more than the others. Problem in visitation which is another crucial point on the grounds as to finalize such transactions the companies have to see the production methods and techniques being used by other companies and also needs to check for its own viability in the following area.


Alongside of the amalgamation of two companies a lot of legal assistance is required. The Indian merger control regime is governed by Competition Act 2002 and associated regulations by Competition Commission of India. Question is; how can a company withdraw from a merger or acquisition deal without fulfilling their contractual obligations in these times of crisis, for this we have to understand an important clause i.e. FORCE MAJEURE.

Force majeure clauses are contractual clauses that alter contractual obligations and liabilities of parties when they do not perform their duties in an extraordinary event or circumstance beyond their control. The Force Majeure clause is embodied in Section 56 of the Indian Contract Act, 1872 [3]. The doctrine of force majeure prevents the parties from the performance of the contract due to its failure. It includes Act of God, pandemic, epidemic, beyond the control circumstances, war-like situation etc.[4]

Important point is that the clause should be mentioned in the contract and if the clause mentions epidemic or pandemic as a situation then the corona virus pandemic will be covered in the ambit of the clause. Many parties tend to use the phrase “beyond the parties reasonable control” hence the following clause have a wider ambit and can include the current crisis but for the applicability of the clause the following party have to prove that the enterprise is not in position to go forward with the contract strictly due to the circumstances created by the pandemic.

The parties have to show that non-performance or delay in performance could not have been mitigated or prevented and when we talk about force majeure it is important to understand that impossible performance is not to be confused with delay in work or low profitability, as irrespective of delay or lower profitability the obligation can be fulfilled.


In these catastrophic times, mergers and acquisitions are clearly falling apart as each business enterprise is trying to strengthen its own foundation and adapt to the changes in economy. The future mergers and acquisitions will heavily depend on the effects of virus, the stretch of this pandemic and the economic conditions which follow. There may be less mergers and acquisitions this year but there are great chances for companies from the most affected sectors to get bail out packages and go for mergers and acquisition to save themselves from losses. On the other hand the firms, not finding amalgamation suitable right now, can use the force majeure clause to withdraw and are expected to form alliance after the times of crisis ease up.

[1] Chhaya Dabas, Mergers and Acquisitions deals shrink across the renewable sector amid covid-19 crisis, https://www.energylivenews.com/2020/05/13/merger-and-acquisition-deals-shrink-across-the-renewable-sector-amid-covid-19-crisis/, (May 13, 2020). [2] Richard D. Harroch, David A. Lipkin, and Richard V. Smith, The Impact of corona virus crisis on mergers and acquisition, https://www.forbes.com/sites/allbusiness/2020/04/17/impact-of-coronavirus-crisis-on-mergers-and-acquisitions/#65b97060200a, (April 17, 2020). [3]Section 56 of The Indian Contract Act, 1872. [4] Rakshit Sharma,” Impact Of Force Majeure on the Performance of the Contract” Manupatra, 2020.

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