MAC CLAUSES - Right to Terminate or Leverage to Negotiate



[Instructor's Name]

Introduction1

Part A: Journal Article and Critical Analysis “MAC Clauses”1

Summary of the Article6

Part B: Analysis of the Article6

Interpretation by the English Courts7

Buyer's Assistance7

Market Crisis8

Bidder's Interest9

Seller's Obligation10

Type and Structure of the Clauses11

Incentives Cultivated12

Summary of MAC Clauses in the Light of Recent Disputes and Cases14

Conclusion16

References18

Material Adverse Change Clauses

Introduction

This paper is based on the analysis of an article in order to facilitate the practitioner in understanding the true nature of MAC clauses. This paper actually deciphers the underlying notions to help a reader to understand that whether MAC clauses give right to terminate or leverage to negotiate. Material adverse change clauses can have great impact on the contracts involving mergers and acquisitions. Material adverse change clauses tend to be relevant until and unless the contract is closed. MAC clauses can be extremely useful in regulating the intrinsic uncertainty of such complex operations such as acquisitions-especially taking into account the current economic situation. Material adverse change clauses are used in different agreements today; however, the analysis in this paper identifies the use of MAC clauses in relation to mergers and acquisitions. Thus, it is important to understand that Material adverse change clauses majorly acts to address the risks associated when a merger agreement is signed. But material adverse change clauses tend to be relevant until and unless the contract is closed. Thus, the practitioners of today should look closely before pitching any situation to their clients.

Part A: Journal Article and Critical Analysis “MAC Clauses”

This article investigates whether the MAC clauses in the recent times have provided leverage to negotiate the terms and conditions or whether it gives a buyer the right to terminate. Today the world is changing rapidly and so is the connotations attached with it. MAC clauses in this regard are no different, which with time has not only evolved but now inculcates a new perspective to look at things. The definition of material adverse change can serve as a reference to assess whether the seller has fulfilled other representations and warranties. This states that most of the experts are of the view that material adverse change clauses are crafted to safeguard the interests of the buyer or the party who is looking to invest in a project. It facilitates the acquirer or the buyer to sign off or walk away from the contract. It also depends on the type of transaction whether it is or public or private in nature. In addition, the fact also needs to be digested that minor violations tends to be irrelevant in assessing their potential liability for breach of contract. Thus ensuring that the buyer can terminate the contract and applying where appropriate compensation for damages can be claimed. However, if after the contract is signed but before the closing of the transaction, a material adverse change occurs in the target company the seller has several mechanisms to limit the scope of the terms of MAC and therefore the buyer's ability to terminate the ...