I’ve previously written about the possible use of the COVID-19 pandemic as a MAC trigger and the negotiation of specific carve-outs to MAC clauses addressing the outbreak. Last week, a member involved in M&A shared some information developed with a data provider about the extent to which the COVID-19 pandemic is being addressed in carve-outs to MAC clauses.
Here’s a summary of 2020 deals where MAC definition included a carve-out related to the coronavirus and similar concepts:
As of the week of 3/2/20, there were 22 pending M&A transactions involving public target companies that trade on either NASDAQ or the New York Stock Exchange. Of those:
– 41% (9 deals) included the term ‘pandemic’, ‘epidemic’ or ‘COVID-19’ in the target MAC definition
– 4.5% (1 deal) specifically addressed COVID-19 by name
– 59% (12 deals) did not include the term ‘pandemic’, ‘epidemic’ or ‘COVID-19’ in the target MAC definition
Of the 17 transactions involving U.S. headquartered public targets:
– 41% (7 deals) included the term ‘pandemic’, ‘epidemic’ or ‘COVID-19’ in the target MAC definition
– 6% (1 deal) specifically addressed COVID-19 by name
– 59% (10 deals) did not include the term ‘pandemic’, ‘epidemic’ or ‘COVID-19’ in the target MAC definition
How does that compare to last year? The research indicated that only 4 of the 24 M&A transactions pending on 3/5/19 involving NASDAQ or NYSE traded targets included carve-out language using the word “pandemic” or “epidemic” in the target MAC definition. As for the 43 deals signed up in 2019 that were still pending, only 12 of the 43 deals have the words “epidemic”, “pandemic” or “COVID-19” as a carve-out.
Given how quickly and dramatically the pandemic has changed nearly every aspect of business and daily life in the U.S. and throughout the world, my guess is that language in MAC clauses specifically addressing pandemics is going to quickly become ubiquitous, and is likely to have staying power.
That being said, many MAC clauses require an adverse event to disproportionately impact the seller in order to fall within their parameters. Several members have commented that this common language makes it even more difficult to use a MAC clause as the basis for terminating a deal due to an event like a global pandemic.
-John Jenkins, DealLawyers.com March 20, 2020
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