In a recent announcement today, Verizon and Yahoo have announced that they are amending the existing terms of their agreement for the purchase of Yahoo’s operating business.  Under the amended terms, Verizon and Yahoo have agreed to reduce the price Verizon will pay by $350 million.  In addition, Yahoo will be responsible for 50% of any cash liabilities incurred following the closing related to non-SEC government investigations and third-party litigation related to the breaches.  Liabilities arising from shareholder lawsuits and SEC investigations will continue to be the responsibility of Yahoo.  Finally, the amended terms provide that the data breaches or losses arising from them will not be taken into account in determining whether a “Business Material Adverse Effect” has occurred or whether certain closing conditions have been satisfied.  Verizon’s acquisition – now valued at approximately $4.48 billion subject to closing adjustments, is expected to close in Q2 of 2017.

In an October 2016 article for Corporate Counsel highlighting M&A Lessons Learned from the Yahoo breach, we noted that such managed resolutions as a result of cybersecurity-related discoveries during the M&A process are not uncommon: “The buyer can insist that the problem be fixed and that the selling company indemnify the buyer for any future problems, or the buyer may adjust its valuation of the company based on the uncovered risk.”

Despite Yahoo’s recent troubles with data breaches and the associated amendments to the purchase agreements, the two companies remain optimistic about the acquisition.  In a recent press release, Ms. Marni Walden (Verizon EVP and president of Product Innovation an New Businesses), states that “[w]e have always believed that this acquisition makes strategic sense. We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo’s tremendous talent and assets into our expanding profile in the digital advertising space.” Yahoo’s CEO, Marissa Mayer, stated that “[w]e continue to be very excited to join forces with Verizon and AOL.  This transaction will accelerate Yahoo’s operating business especially on mobile, while effectively separating our Asian asset equity stakes. It is an important step to unlock shareholder value for Yahoo, and we can now move forward with confidence and certainty.”