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Evaluating Whether COVID-19 Constitutes a MAC Under M&A and Financing Agreements

Client memorandum | March 18, 2020

A critical legal issue that has arisen in recent days is whether the COVID-19 pandemic may constitute a “Material Adverse Change” under existing agreements. Generally, MAC clauses are interpreted narrowly and there is a high bar to a finding that a MAC has occurred. At the same time, the COVID-19 pandemic appears to be a singular event, with the potential to have an extreme impact on companies, and arguably is unlike the types of events that the courts have evaluated in the past with respect to MAC provisions. In each case, the analysis will depend on the specific wording of the provision at issue and the effects of the pandemic on the particular company. Of note, the conclusion may change over time if the pandemic does not resolve in the relative near-term.

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