The Long Arm of the MAC

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2017-07-13

Posted by Daniel E. Wolf, Kirkland & Ellis LLP, on Thursday, July 13, 2017
Editor's Note: Daniel E. Wolf is a partner at Kirkland & Ellis LLP. This post is based on a Kirkland & Ellis publication by Mr. Wolf, and is part of the Delaware law series; links to other posts in the series are available here.

Dealmakers have long recognized the implications of a Material Adverse Effect (MAE/MAC) standard in a merger agreement. As the Delaware court noted in the Hexion case, a buyer asserting an MAC condition “faces a heavy burden when it attempts to invoke a material adverse effect clause in order to avoid its [contractual] obligation.”

In a recent Delaware case involving chocolate chip cookies, Chancellor Bouchard extended the reach of the MAC jurisprudence in assessing the termination of a license agreement between Mrs. Fields and Interbake.