In praise of ambiguity

Author: | Published: 1 Dec 2007

Recent market fluctuations have led some acquirers in the US to try and pull out of deals by looking closely at their material adverse change (Mac, also referred to as material adverse effect or MAE) clauses to see if such a move can be justified without a punitive fee. Mac clauses can be complicated and ambiguous, as demonstrated by two recent cases in the US. A few simple tips can help mitigate this situation.

A volatile cocktail has fuelled the M&A boom over the past five years, composed of record inflows of private equity capital, low interest rates and easy credit terms. Ever-increasing amounts of capital chased a limited number of quality acquisition targets, and sellers held the power in negotiations. To win the hand of their desired targets, suitors not only had to offer generous price terms; they also had to confirm that the union would be consummated, by...