In one of the few contested mergers to be adjudicated by trial over a material adverse effect (MAE) claim related to COVID, the Delaware Chancery Court ruled that Kohlberg & Company’s $550 million acquisition of DecoPac must be completed. The post-trial opinion “resolved all issues in favor of” Brattle’s clients, DecoPac and Snow Phipps.

Brattle supported three testifying experts in the litigation, including Principal & Chairman Yvette Austin Smith, Professor Steven J. Davis of the University of Chicago Booth School of Business, and Gregory Bedrosian, Managing Partner and CEO of Drake Star Partners. Brattle Principal Timothy McAnally served as a consulting expert and managed the project teams.


On March 6, 2020, two private equity firms agreed to a $550 million transaction: Kohlberg & Company would acquire Snow Phipps Group’s portfolio company DecoPac Holdings, a supplier of products used to decorate cakes and cupcakes. A few weeks later, in April 2020, Kohlberg backed out before the scheduled closing of the transaction, asserting that its debt financing for the deal was no longer available and that COVID-related conditions had triggered the MAE clause of its deal contract with Snow Phipps. Snow Phipps subsequently sued the Kohlberg entities involved in the acquisition, seeking to honor the terms of the deal and complete the transaction.

Brattle’s Role

Ms. Austin Smith examined the financial and economic impacts on DecoPac’s business. She found that DecoPac’s revenue declines were short-term in nature and had not fundamentally changed the value of the business. Furthermore, relying on multiple industry metrics, she concluded that DecoPac’s temporary declines were in line with comparable companies and thus were not disproportionate.

Professor Davis and the Brattle team used a regression analysis to determine whether the decline in DecoPac’s revenue could be attributed to changes in law, which, if proved, would fall outside of the definition of an MAE. The analysis demonstrated that the vast majority of the decline in DecoPac sales was related to government shutdown orders due to COVID.

Mr. Bedrosian opined, based on his 25 years of investment banking experience, how the certainty of a transaction closing is a distinguishing element of an M&A bid. He also testified, based on industry custom and practice, as to how parties typically negotiate and interpret certain sections of a stock purchase agreement and debt commitment letter. Mr. Bedrosian additionally testified to the state of the debt financing markets as of the relevant dates.


On April 30, 2021, in one of her last rulings as a Vice Chancellor, incoming Chancellor Kathaleen S. McCormick issued a ruling that “resolves all issues in favor of the seller,” ordering the buyers to close on the purchase agreement. Calling the ruling “a victory for deal certainty,” the Vice Chancellor found that DecoPac had not experienced an MAE and did not divert from the ordinary course of business in responding to COVID.

In her ruling, Vice Chancellor McCormick also:

  • Concluded that Professor Davis “established that the vast majority of the decline in DecoPac sales arose from, or at the very least related to, those government orders, and it showed that sales first fell at the precise moment that such orders were first issued,” and therefore plaintiffs “showed that the effects fell within one of the SPA’s [sale and purchase agreement’s] enumerated carve outs.”
  • Concluded that Ms. Austin Smith “presented a narrower and more realistic description of DecoPac’s industry…”; that Ms. Austin Smith “established that DecoPac’s sales closely tracked two different proxies for the performance of comparable entities”; and, ultimately, that “… [Ms.] Austin Smith correctly concludes in her reports, these data sets do not show that DecoPac faced a disproportionate impact relative to its industry peers.”
  • Relied upon Mr. Bedrosian’s analysis of the state of the debt financing markets as of the date of trial, and credited Mr. Bedrosian’s testimony regarding how certain clauses in transaction documents are interpreted in the investment banking industry.

The legal team representing Snow Phipps and DecoPac included Andrew J. Rossman, Sascha N. Rand, Silpa Maruri, Emily Kapur, Nicholas Gerschman, Courtney Whang, Owen Roberts, and Andrew Mollard of Quinn Emanuel Urquhart & Sullivan, LLP, and Michael A. Barlow and Eliezer Y. Feinstein of Abrams & Bayliss LLP. The experts were supported by a Brattle team that also included Brent Lutes, Vera Liang, Julia Zhu, and Kaitlyn Brady.

The matter is Snow Phipps Group LLC and DecoPac Holdings Inc. v KCake Acquisition Inc., Kohlberg Investors VIII-B L.P., et al., case number 2020-0282, in the Court of Chancery of the State of Delaware.