Rethinking the Material Adverse Change Clause in Merger and Acquisition Agreements: Should the United States Consider the British Model? – Note by Andrew C. Elken

From Volume 82, Number 2 (January 2009)
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The material adverse change (“MAC”) clause is a contract provision that periodically dominates the headlines, usually in the wake of a major financial downturn, and the most recent downturn has not been an exception. A MAC clause dispute typically occurs when one side of an agreement no longer wants to complete a merger or acquisition, and often the stakes are high: in the midst of the credit crisis and economic turmoil that began in 2007, MAC disputes erupted in at least thirteen high-profile transactions—the four largest disputes ranging from $1.5 billion to $25.3 billion. As recently as fifteen years ago, the MAC clause was essentially an uncontroversial boilerplate provision, but the clause has since changed dramatically. This Note explores the modern MAC clause in the United States through a comparative analysis with the United Kingdom, which has effectively prohibited a transformation of the traditional MAC clause.