Material Adverse Effects: Victoria’s Secret

Is Victoria’s Secret a prudent investment for a female-lead private equity firm in the wake of an attempted quick exit by another PE firm during the COVID-19 pandemic?

Donna Hitscherich  | Fall 2020
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In February 2020, Sycamore Partners agreed to acquire Victoria’s Secret, a struggling lingerie brand. In mid-March, when the COVID-19 virus had taken a strong hold on the United States, Victoria’s Secret closed all of its 1,091 stores in the United States and Canada in addition to furloughing nearly all of its employees. At the end of April, Sycamore attempted to exit the transaction agreement it had entered with L Brands, Inc., the parent company that owned Victoria’s Secret, maintaining that the agreement’s representations and warranties allowed the buyer to terminate the deal given a Material Adverse Effect and that L Brand’s response to COVID-19 met the conditions indicated in the agreement’s MAE clause. In this case, students are asked to consider whether the Sycamore lawsuit creates an attractive investment opportunity for a fictitious female-lead private equity firm.

Case ID: 210301

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