New York, NY. Nixon Peabody LLP today released its 10th annual MAC survey, an examination of material adverse change (MAC) provisions in M&A transactions valued at more than $100 million. The survey provides insights on a range of issues including the structure of MAC provisions and MAC exceptions.
“Throughout the past decade, these clauses have been an important bellwether of how changing market, economic, and other conditions impact M&A deals,” said David Martland, leader of Nixon Peabody’s Global Business & Transactions Practice. “There are significant opportunities for both buyers and sellers who understand the provisions and how external conditions impact them at any given point in time.”
Overall, the survey revealed:
- 89% of the agreements surveyed contained a MAC on the “business, operations, financial conditions of the company” as a definitional element. This represents a slight increase from last year’s survey, which showed this inclusion in only 85% of agreements surveyed;
- The number of acquisition agreements that did not contain a MAC closing condition decreased from 7% last year to 4% this year;
- The use of pro-bidder “disproportionately affect” language increased in MAC exceptions to 73% this year from 40% last year;
- Increasing use of pro-target MAC exceptions such as those relating to changes in the economy, legal developments, and acts of war
- A limited attempt to craft MAC clauses and closing conditions in M&A agreements to address court rulings limiting the application of MAC clauses.
Nixon Peabody partner Richard F. Langan, Jr., added, “Although the M&A landscape continues to evolve, MAC provisions continue to remain important considerations as agreements are made and finalized. This year, we saw that, in the context of larger deals, the MAC clauses tend to favor target companies, while bidder-buyers and target-sellers are on more even playing fields in the context of other deals, with the exception of distressed company M&A transactions, where bidders understandably have greater negotiating leverage.”
The 2011 Annual MAC Survey examined 314 agreements, including merger, stock purchase and asset purchase, stock purchase, and merger agreements, executed between June 1, 2010, and May 31, 2011. The list of transactions, representing a diverse variety of industries and value from $100 million to $39.0 billion, was obtained from publicly available information submitted to the Securities and Exchange Commission (SEC). The results are statistically representative of the climate of M&A transactions during that period, although the analysis is not technically scientific and does not include private transactions for which no agreement was made available. To view the complete survey results, please click here.