This does not mean that Microsoft can leave for no reason. When the closing agreement is announced, the buyer and seller sign the merger agreement, which is imposed on both the buyer and the seller. If the buyer leaves, the seller will take legal action. Akorn. As noted above, the Akorn court found that there was a MAC allowing the acquisition to terminate the merger contract. The financial decline of the target company and its importance were more dramatic than in previous cases where Delaware courts assessed whether an MAC had occurred. The financial performance of the goal “fell off a stumbling block” shortly after the signing. In the year following the signing, EBITDA decreased by 86%. The company`s analyst ratings increased from approximately 32 $US per share to 5-12 $US per share; and the declines showed no signs of abandonment.

The court (i) rejected the notion of implicitly assigning to the MAC clauses the risks of acquisition “known” of the acquiror at the time of signing; and (ii) to note that the emergence of new competitors for the company`s three main products constituted a “company-specific” change. The Tribunal also found that the lack of representation of compliance with the legal provisions (to the extent of an MAC) when concluding a second independent reason for termination of the contract was met. The court found that the reorganization of the long-standing and pervasive regulatory non-compliance with the objective (a pharmaceutical company) would take several years, cost 21% of Akorn`s market capitalization and have lasting “quality” effects. STANDARD MAC deployment. A standard MAC provision in an acquisition agreement consists of three parts. First, an MAC is generally defined as any event, development or condition that has occurred or should reasonably be expected, a material adverse effect on the business, financial condition or results of the business of the company and its subsidiaries (as a whole). Second, the provision generally excludes certain events such as acts of God, meteorological phenomena, floods, earthquakes, natural disasters, terrorism or military actions, general economic downturns, general conditions, general conditions in the enterprise industry and other general categories of market or credit conditions. Some provisions explicitly exclude “pandemics,” “epidemics,” “diseases” or “health emergencies” – and recently (for example. B in the Morgan Stanley-E-TRADE merger treaty), some explicitly ruled out the “COVID 19 pandemic.” Third, the provision generally specifies that they are not excluded with respect to some or all of the aforementioned exclusions, as they have had a disproportionate impact on the company and its subsidiaries (overall) compared to others in the same sector. In an acquisition financing agreement, there is generally a condition to the conclusion that there was no MAC target company and that there is a cross-reference to the MAC definition in the merger agreement.

A MAC clause is generally characterized by exceptions and exclusions that limit the application of the clause and its negotiation leads to a risk-sharing between the buyer and the seller.