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December 20, 2007

MACs and Lawyers

We are watched three major cases of busted buyouts that turn on Material Adverse Change (MAC) clauses in the deal paper.  It is amazing how poorly drafted the clauses are.   We find lawyers fighting over "would reasonable be expected to.. have... a material effect" in place of "had... a material effect" (in how many cases would this matter? I suspect zero) yet we see no exclusions or defining language that depend on easily quantifiable risks (a percentage change in prime, for example).  It would be easy to say that a change in prime did (part of the definition of material) or did not (an exclusion) break the deal.  Had such simple drafting been in place these cases would not go to trial.  Why fight over general language that does not matter and not deal with other language that does?

December 20, 2007 in Mergers & Acquisitions | Permalink

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