When negotiating a MAC clause, a target company should ensure that all information provided to the bidder prior to the announcement of the bidder`s offer is excluded from the MAC clause. Under these conditions, the affected entity may agree on a list of information that will be communicated to it. In addition, the objective should be to provide exceptions to the definition of an MAC for general economic circumstances. Finally, the objective should take into account the relationship between a MAC clause and an agreement on break-up costs. Whether the COVID 19 pandemic can, under a MAC clause, create a right of withdrawal of the buyer depends on its specific wording. Common MAC clauses often do not explicitly cover the case of an almost global or global shutdown due to the massive spread of a viral disease. In many cases, changes in the general economic conditions or industry of the target company are not likely to be covered by the MAC definition. Pandemics contained in traditional MAC clauses are often explicitly excluded from possible reasons for withdrawal. If the MAC clause contains an explicit list of concrete or concrete examples, the buyer may ignore circumstances that are not in the catalogue or are not comparable to the examples cited in a (judicial) dispute.
The inclusion of an explicit clarification that the catalogue should not be exhaustive is therefore quite advantageous for the buyer, but often difficult to implement in the context of negotiations. In the event that the purchase price is financed externally, the underlying financing agreements often also contain a MAC clause. If the content of this clause differs from the MAC clause in the sales contract, the financial bank may withdraw from the financing contract, while the buyer remains bound to the sales contract. In particular, transactions dealing with regulatory aspects, such as authorizing merger control, often lead to the separation of the signature and conclusion of the agreement. Of course, a longer transition period between the signature and the conclusion increases the risk to which a buyer may be exposed before the agreement is concluded. In share purchase agreements, essential amending clauses (MAC clauses), sometimes defined as significant negative effects clauses (MAE clauses), are generally intended to protect the purchaser from circumstances that have a negative impact on the target business that may occur during the transitional period between signing and concluding. Faced with the current crisis of the Covid 19 virus, MAC clauses in share purchase contracts have once again come to the fore. As a general rule, the seller is not interested in the inclusion of a MAC clause, as this results in a significant transfer of risk to his detriment, since these are incidents that occurred between the signing and the conclusion of the sale contract. If the seller accepts the inclusion of a MAC clause, he is interested in keeping the scope of the clause as narrow as possible and limiting it to commercial circumstances, i.e. commercial MACs.
When the parties decide to include a MAC clause in the sale agreement in the form of a negative finding condition and/or a right of withdrawal, they must be aware that in the event of a dispute, this can lead to great legal uncertainty and significant practical problems. A dispute (arbitration) over whether or not to comply with the terms of the MAC clause may take several years during which the manner in which the target company is managed remains completely uncertain. During the transitional period between the signing and closing of a transaction, the contractual terms agreed between the parties may be affected by unforeseen circumstances that seriously harm the target company. This leads to the need to decide whether the buyer is still obliged to conclude the agreement and pay the agreed purchase price or, on the contrary, whether it is legitimate to terminate the contract – or, more often, to renegotiate the terms of the transaction – without liability in the event of infringement.