In a vivid illustration of just how atypical this year has been for business travel, one of 2020's most influential deals was one that fell apart. In May, virtual card giant Wex said it was pulling out of a planned $1.7 billion acquisition of travel payments specialists eNett and Optal, which the parties had definitively agreed upon in January.
In announcing her company was putting the brakes on the deal, Wex CEO Melissa Smith cited the devastating effects Covid-19 had wrought on the corporate travel industry in the months after the pact was signed. Wex invoked the fallout as a "material adverse effect" on the business of eNett and Optal, thereby giving Wex the right to negate the sale agreement under terms of the contract.
Wex's counterparties in the transaction—including eNett majority owner Travelport—filed a lawsuit in a U.K. court seeking to compel the completion of the sale on the grounds that the Covid-19 outbreak was widely known at the time of the sale and that pandemics had been carved out from the definition of material adverse effects as set forth in the contract.
In October, the court sided with Wex on a key preliminary issue in the case, ruling that eNett and Optal should be defined as operating under the broader business-to-business payments industry instead of the narrower travel payments vertical, which has suffered a more widespread overall downturn than B2B payments at large amid Covid.
The ultimate decision in the case will have a major effect on the bottom lines of the parties involved, all of which continue to face revenue headwinds as business travel remains drastically reduced. And should Wex be allowed to walk away, it could open the door for parties to other Covid-era agreements to seek reversals of their own deals as well.
Update: In mid-December 2020, the parties in the case reached a settlement under which Wex agreed to pay $577.5 million in cash to purchase eNett and Optal. As part of the sale, former eNett managing director and CEO Anthony Hynes joined Wex as president of its new travel division, reporting to Smith.