MOMENTUM NM LAW OFFICE-THE MATERIAL ADVERSE CHANGE (MAC) CLAUSE.

The Material Adverse Change (MAC) clause (important Purchase Price Adjustment, Break up fees and Reverse Termination Fees, too) would be the last resort for a buyer if unexpected circumstances arise that significantly change or reduce the value of a target company, assets, or business in the period since the signing. We saw similar situations which included million break-up fee that seller  would owe buyer if it changed its mind prior to the closing date.

Is it possible in current circumstances in April 2020, that we qualify as a MAC under an M&A agreement as situation where the buyer  have opportunity to withdraw from the transaction? What constitutes a material adverse change MAC (or a Material Adverse Effect –MAE) is not always, so clear. According to courts litigating MAC claims focus on whether there is substantial threat to overall earnings potential relative to past performance, not future.

The MAC/MAE clause is, as a rule, carefully negotiated and thoroughly defined by the parties.

Apart from the particular MAC clause, an important role in decision-making will be attributed to the rules of the governing law, as set forth in individual M&A agreements.

Both parties is always to close the deal because they have already invested time, financial, organisational and other resources. In order to skip long-therm and very expensive court or arbitration proceedings, the parties could always rich and agree on a acceptable commercial solution for both sides.

NM Law Office encourage all parties to try to find and negotiate these solutions, in order to preserve the deals and ensure that the everything goes well on.

For NM Law Office Public Relation Department, April 2020.