MAC Clause in M&A: Case Study of Two Real Firms

MAC (Material Adverse Change clause (in M&A)) clauses in M&A are decisions you make up front to protect price and long-term value when the target encounters a difficult period between signing and closing. Clarity on triggers, thresholds, and carve-outs is needed, because a poorly drafted MAC can turn a clean deal into a litigation minefield. I’ve watched this play out in practice, and the pattern is persistent: buyers push for broad protection, sellers push for precision. The reality is that courts have favored specificity and demonstrated that MAC disputes focus on long-term earnings power rather than short-term blips, even when a pandemic or tariff change hits the market.

Let me ground this with the core idea. A MAC clause is a protection mechanism that gives you the right to walk away or renegotiate if something substantial happens to the target after signing but before closing. The key is “substantial,” and that’s where disputes live. MAC clauses vary widely. Some are broad and subjective, allowing the buyer to argue a material effect across multiple dimensions.

Others are tightly drafted with objective thresholds, explicit carve-outs, and clear measurement periods. Most deals today sit between these extremes, with a quantified approach that reduces ambiguity but still allows interpretation.

Delaware law shape matters a lot in the U.S. The Akorn v. Fresenius case in 2018 is the touchstone. The court allowed the buyer to terminate only after an earnings collapse and persistent issues that extended over a period, not a few months. The outcome reinforced that MAC triggers must reflect a change that is material and durable, not a temporary setback. In practical terms, that means sustained shifts in earnings power, not a one-off bad quarter. Since Akorn, termination has a high bar, and many deals survive or renegotiate on tailored remedies rather than termination.

In October 2025, Cosette Pharmaceuticals tried to invoke a MAC to terminate its A$672 million deal for Mayne Pharma. The Australian court rejected the attempt. That decision confirms the global trend: MAC claims succeed rarely, and only when the adverse change is demonstrably long-lasting and company-specific. It also shows why robust governance around the deal timeline, data integrity, and clear measurement benchmarks are needed.

The Cosette v. Mayne case also highlights that market moves, like a stock price drop or macro shocks, do not automatically qualify; you need a dedicated, agreed threshold tied to the target’s earnings, cash flow, or revenue power.

From a practical standpoint, the typical triggers fall into a few buckets. Severe financial edclines, regulatory or legal changes that hit the business model, loss of a major customer group representing at least 30% of revenue, or a key management departure that undermines ongoing performance. Public health events, like COVID-19, appear in MAC discussions, but the trend across courts is to require company-specific impacts that are dramatic and durable. The critical takeaway: pandemic effects get a pass only if the target’s earnings power is harmed beyond normal market reactions. It’s not enough to show a one-time revenue dip; you need a sustained, material erosion.

Carve-outs are the practical tool to make MAC enforceable while keeping the deal workable. General macroeconomic downturns are rarely carved in. If you want MAC protection for currency volatility, regulatory shifts, or tariff regimes, Brazilian contexts, USMCA considerations, or cross-border tax changes, you embed those as explicit carve-outs or thresholds.

From 2023-2025, large-cap deals increasingly include pandemic or war carve-outs, reflecting risk reality and the court’s appetite for clear baselines. In Australia and Brazil, the trend toward explicit currency and regulatory carve-outs is growing, matching the global need for predictable measurement metrics.

Quantified MAC thresholds are the most practical way to reduce disputes. For example, thresholds like a ≥15% drop in revenue or EBITDA over a 12-month window, or a 15-20% cumulative decline in earnings power, are now common. You’ll see language that ties the trigger to defined revenue lines, a specific time horizon, and a measurable period. The aim is to avoid debates over what constitutes a material adverse effect. But even with quantified metrics, litigation risk remains high because the fight centers on proving the decline is durable and company-specific, not just a broad market move.

The data supports these patterns. Since 2001, there have been 23+ major Delaware Chancery MAC cases, and only Akorn v. Fresenius resulted in a buyer terminating based on MAC. That statistic shows success stories are rare, and the bar is high. In the Cosette v. Mayne Pharma dispute, the market reacted with an 18% drop in Mayne Pharma’s shares on news of Cosette’s withdrawal attempt, underscoring how market perceptions can diverge from legal outcomes. Across markets, pandemic-era MAC claims had a low rescission rate, with most outcomes favoring deal preservation or renegotiation rather than termination.

Take the practical path if you’re structuring a MAC around a real deal. Start with a clear definition of what constitutes a material adverse change, anchored to long-term earnings power. Attach objective thresholds to revenue, EBITDA, or cash flow with explicit measurement windows. Build robust carve-outs for macro events that you can’t control but that have obvious and universal effects, while keeping exceptions narrow enough to preserve deal value. Require that the adverse change be company-specific and durable rather than a temporary blip. Establish data governance for the measurement: audit rights, sources, frequency, and dispute resolution mechanisms. And insist on a process for renegotiation or termination that is predictable and timely, because extended delays from MAC disputes hurt both sides.

As for case study value, the Cosette v. Mayne scenario is instructive. It shows that even a sizable cross-border deal can withstand MAC pressure when the court finds the occurrence was not long-lasting or company-specific enough. It also demonstrates market consequences and the strategic importance of a well-defined measurement framework up front.

For buyers, that means push for clearer triggers and specific thresholds. For sellers, the takeaway is to advocate for narrow definitions and to push for remedies that preserve value without leading to a total exit.

What does this mean for practice today? MAC clauses should be treated as risk allocations, not escape hatches. You want predictable protection that aligns with strategy, not broad language that invites protracted litigation. In the U.S., the Delaware precedent sets a high bar for termination; in Australia and Brazil, courts and practitioners inland similarly emphasize durable, company-specific effects. Across markets, refined thresholds and explicit carve-outs reduce disputes and protect deal value.

If you’re building or reviewing an M&A playbook, here are concrete steps. Map the deal’s earnings power trajectory and identify the most sensitive revenue or cost lines. Draft MAC language with explicit, measurable thresholds and a defined measurement period. Include sector-specific carve-outs (health regulations for pharma, currency risk for cross-border deals, tariff regimes for importers).

Create a data-driven process for monitoring and reporting, with a clear path to renegotiation or termination. And finally, track litigation outcomes and evolving jurisdictional preferences to adjust templates for future deals.

In my view, the best MAC clauses align incentives and reality. They recognize that some events are outside control but that the deal’s value rests on sustained performance. You want to avoid both overly broad protection that invites opportunism and overly narrow terms that offer little risk protection. The balance matters because MAC disputes hinge on how investors price risk, how lawyers frame proof of damage, and how courts interpret long-term earnings power in a volatile market.

If you’re exploring this topic further, read up on the latest discussions from Clayton Utz on “how much protection do buyers really have,” the Oxford Law Blog’s take on MAC in Brazilian law, and the recent Australian interpretations in Cosette v. Mayne. These sources provide guardrails and signal where your next deal needs tighter drafting or a more disciplined verification framework.

Next steps: review your MAC clause templates against common thresholds and carve-outs, run a hypothetical dispute scenario, and align with your deal team on measurement standards before you sign. If you want deeper guidance, check the glossary and course materials on Matactic to sharpen your drafting and negotiation playbook.

You’ve got to stay ahead of the curve, because MAC disputes aren’t going away. Let’s continue with the practical work and keep these deals protected, not litigated.