Friday, October 12, 2007
As timely as ever, Nixon Peabody has their Annual MAC Survey out (you can download it here). They state:
We completed this year’s survey before the onset of the credit crisis that began in July 2007. As such, we have not reviewed agreements since that date to determine the impact the crisis will have on deal terms in general and MAC clauses in particular. However, we do believe that the credit crisis will have a chilling effect on the larger transactions and would expect that the overheated pro-seller market will cool off significantly as a result of less leverage being available to private equity buyers. Accordingly, we would expect deal terms (including the MAC provision) to become more buyer-friendly. The extent and swiftness of the change is difficult to predict and may take some time to work its way into the agreements themselves.
I'm not sure I agree with that completely. While buyers may indeed bargain harder because there are fewer deals, you will also see seller attorneys negotiating harder over MAC clauses and reverse termination fees in response to the recent problems in the market. In particular, sellers are likely to insist on more and tighter exclusions to the MAC definition and less likely to accept reverse termination fees in private equity deals (though 3Com is not a good omen for this). There is also the liklihood of a significant rework of these clauses in response to a court decision in either SLM, Genesco/Finish Line or any of the other MAC cases brewing.