Anvendelsen af MAC-klausuler i M&A-transaktioner

Laura Ginsborg Olczyk & Josefine Høy Bendtsen

Student thesis: Master thesis


Mergers and acquisitions are particularly vulnerable to adverse changes when signing and closing are not simultaneous. MAC clauses allocate financial risks and other risks relating to the transaction, that can arise in this period of time. The following master thesis examines the legal and economic ramifications of the use of MAC clauses in M&A transactions. The main purpose is to assess how the parties can improve their legal position by using these clauses. Through the legal analysis, the thesis providesa thorough assessment of how applicable law regulates the issue, when a subsequent circumstance leads to a material adverse change. The analysis illustrates how no source of applicable law will yield the right to terminate the agreement. Therefore, the parties may use a MAC clause which is a contract provision that assigns risk between contracting parties. A MAC clause allows the buyer not to close the transaction if the target business suffers a material adverse change.The clause is generally vaguely formed, leaving it up to the court to interpret and complete the provision. It can be assumed that the court will interpret the clause in such a way that a high threshold of materiality is applied. The parties may ensure their legal position by defining material adverse change.Therefore, a customary MAC-provision typically provides little judicial protection for the buyer, but can instead be used as a tool for renegotiating the price.The thesis then examines the economic effects of using a MAC clause, in particular how the parties’ incentives are influenced by the court's interpretation and the risk allocation. The more closely the courts’ interpreted contracts resemble the parties’ true wishes, creates an incentive of leaving gaps and to write general terms. There exists a trade-off between ex ante drafting costs and ex post conflict resolution costs. The court can however demand that the parties create a clear contract at the outset in some cases.The risk allocation in the MAC clause can be pareto-optimal, when both exogenous and endogenous risk are allocated upon the seller. This gives the seller the right incentives to invest in mitigating the loss and eliminates the moral hazard problem. When the seller is certain upon the effect of the investment, there might however exist a moral hazard problem, which can be solved through the use of an earn-out clause.The thesis then concludes, that the parties will improve their legal position by using a MAC clause. The clause should define material adverse change, using accounting terms. Further, the legal position is more optimal, when the court sets a high threshold for the use of the MAC clause. This interpretation of material adverse change provides an efficiency gain and creates certainty for the parties.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2019
Number of pages120
SupervisorsHenrik Lando