COVID-19 and what it means for M&A Transactions and MAC Clauses

Dato 16 mar. 2020
Download PDF version PDF

MAC Clauses

A MAC clause covers a “material adverse change”, meaning that a party (typically the buyer) can withdraw from an agreement if an event has occurred that has caused a material adverse change, usually to target’s value or general financial circumstances. In order for the other party (typically the seller) to accept a MAC clause, the clause will, if triggered, sometimes include compensation to the other party.

Some MAC clauses are designed to be activated only if the target business is materially adversely affected, while others can also be applied as a result of generally significant negative market conditions. The latter in particular is problematic for the seller, seeing as it gives the buyer the option to walk away from a deal, resulting in less deal certainty. The buyer, on the other hand, would find it attractive to guard itself against any possible problems whether related to target’s business or general.

MAC clauses form part of the risk allocation in negotiations between a seller and a buyer and are especially relevant in transactions where signing and closing does not occur simultaneously, as the seller will be running the target until closing.

The scope of MAC clauses, if applicable, should, for the sake of both parties, be drafted carefully and in a balanced manner so that it remains clear when and under which circumstances a party can withdraw from an agreement. In general, the buyer will have the burden of proving that a material adverse change has occurred.

MACS and Impacts of COVID-19

Due to the recent COVID-19 breakout, the financial performance of many companies across industries will likely be significantly negatively affected and several ongoing or contemplated M&A transactions risk becoming affected, if they have not already.

Buyers will have an increased interest in making sure that the business of the target does not develop negatively after the completion of due diligence prior to signing, or between signing and closing. This is especially relevant where the buyer is obtaining debt in order to finance the acquisition and needs certainty that the bank will provide the required financing.

Sellers, on the other hand, maintain a huge interest in getting as much deal certainty as possible, including getting comfortable with and making sure that the buyer has the required financing in place.

Both buyers and sellers must to be able to maneuver in a new transaction landscape affected by the COVID-19 and must be aware of how the COVID-19 affects the risks associated with any relevant deal in order to diligently entertain negotiations on how to mitigate risk between them, including if and to what extent MAC clauses should be applied as well as their contents.

MACS in contemplated M&A Transactions

Where transaction documents are currently under negotiation, the parties should consider specifically addressing how the COVID-19 outbreak should be treated in the context of the transaction. Given that this is very much a known risk at this point, parties will likely want the certainty of knowing how, if at all, this risk could impact the transaction (particularly once the deal is announced) rather than leaving the result unclear. Certainly, sellers will want to make it clear that any negative effects from the COVID-19 outbreak cannot impact the transaction. On the other hand, if buyers are not willing to take risks arising from the COVID-19 outbreak in relation to the deal, they should clearly address this as well.

In general, the Danish courts will probably be reluctant to find in favour of a claim that a material adverse change event has occurred due to the COVID-19 outbreak (at least at this point). Consequently, buyers seeking certainty on this issue may not want to rely on the general terms of the MAC standard alone and may rather negotiate a specific closing condition regarding the spread of COVID-19 and the impacts thereof. Needless to say, sellers may very well be unwilling to take deal execution risks relating to COVID-19 and may push back on buyers seeking specific closing conditions or pause sale processes to allow the outbreak and its consequences to play out.

In order for COVID-19 or any other cause to be considered a material adverse change, such cause should either be specifically mentioned in the MAC clause or be of more permanent character and not just a temporary negative impact on the target company’s business; the latter perhaps not quite clear at this stage of the COVID-19 outbreak.

If you have any questions or would like further information on the above, you are welcome to contact Partner Mattias Vilhelm Warnøe Nielsen ( or Senior Associate Martin Søndergaard (


The above is not legal advice and Moalem Weitemeyer Bendtsen does not warrant that the content of the above is correct. With the above, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader's use of the above as a basis for decisions or considerations.