Material Adverse Change uncertainty: costing a fortune if not corporate lives

Abstract

Material Adverse Change/Effect (‘MAC') has become an important yet chaotic legal concept. With its vague definition and multi-functional objectives on the one hand, and dramatic consequences arising from the instability of the global financial system, terrorism, Brexit, and COVID-19 on the other hand, the significance of MAC has grown. The article analyses the uncertainty surrounding MAC under English law, critically investigating MAC and its future in debt finance and M&A following Delaware’s ground-breaking decision in Akorn v Fresenius and the more recent decision in Channel Medsystems v Boston Scientific. The article argues (i) for a growing ex-ante and ex-post practical importance of MAC; (ii) that Delaware MAC principles could be a relevant reference for resolving English MAC uncertainties, provided one considers the specifics of MAC, in both jurisdictions, and in M&A and debt finance; and (iii) that there is no overarching model for correctly applying MAC, in debt finance or M&A.