“MAC” Clauses in US Corporate Acquisitions: Why They Rarely Prove Effective

“MAC” clauses (Material Adverse Change) have little chance of being effective under US law. The purpose of the clause is to grant the buyer a right of withdrawal (Rücktrittsrecht) in the event of a deterioration in the target company’s financial or earnings position.

NIETZER Rechtsanwälte is not aware of any transaction – particularly not under the law and case law of the US state of Delaware, whose law is most frequently chosen in corporate acquisitions, not least to reduce the risk of piercing the corporate veil (Durchgriffsrisiko) – in which a buyer was granted a right of withdrawal on the basis of a simple MAC clause. Under Delaware law, a MAC condition is almost meaningless.

Practical note: A buyer wishing to protect itself against a deterioration at the target company must agree on clear, numerically defined thresholds, the shortfall of which triggers a right to withdraw.