A typical mac clause in an acquisition agreement assigns the seller risks specific to the company, which is often considered in a better position to anticipate and prevent any adverse changes in its business, but which highlights general market or “systemic” risks and attributes them to the buyer. In general, the systemic risks referred to include “acts of war, violence, pandemics, disasters and other force majeure events”. 5 Even where a systemic risk is initially assigned to the purchaser, MAC clauses are often an exception to circumstances in which an event affects the seller disproportionately (or materially disproportionately) compared to its industry counterparts. In such a situation, the risk moves to the seller. March 26, 2020 – Acquisition contracts and external financing agreements generally relate, explicitly or implicitly, to the possibility of unforeseen changes in circumstances such as pandemics in a substantially negative amending clause (“MAC”).) This customer tendering procedure examines MAC clauses, as they relate to COVID-19 with respect to mergers and acquisitions and debt financing agreements. Hughes Hubbard`s reports on legal responses to COVID-19 are available here. Although the basis of the final sale contract is covered in the form of insurance and guarantees, the compensation clauses give it strength. With this clause in effect, if the seller failed to disclose a liability or covered it in some way, the seller pays a huge sum. Below, you will find the compensation provisions that are often negotiated: the contractual terms must also indicate when and under what circumstances the parties can terminate the contract. In the event of an infringement, the contract may be terminated by mutual agreement of the parties or by one of the parties. The contract may also be terminated on a date agreed by the parties. The termination clauses contained in an acquisition agreement indicate the conditions under which one or more of the parties may terminate the contract before the conclusion.1 They also describe the impact of the termination on the parties, including: (1) all provisions remain binding after termination or “termination of life” and (2) all appointment or broadcasting fees or other payment required in the event of termination. Standard.
Some credit contracts have a MAC rule as a delay event. Borrowers and their advisors should review the scope of these clauses and be prepared to respond proactively to pandemic developments. The sales contract must also provide for risks and what, in the event of breach of contract, non-disclosure of relevant facts, inaccurate insurance or guarantees, fraudulent acts, etc. The profitability of an ongoing acquisition transaction may be jeopardized if a seller`s activity deteriorates significantly between the signing of the acquisition contract and the closing of the transaction (particularly because the price of the entity or assets has been set in the contract and is generally not subject to adjustment on the basis of such a deterioration). Acquisition agreements generally address this situation through a MAC clause.