Introduction
The COVID-19 pandemic has raised a fundamental question for
M&A participants: does the outbreak of COVID-19 and the impact
on a business constitute a "Material Adverse Change"
(referred to as a "MAC") under merger agreements? The
answer is important because if the pandemic is a MAC, then buyers
can typically walk away from a deal without penalty or legal
exposure. On the other hand, if it is not a MAC and buyers try to
walk the seller can seek damages and/or seek specific performance
of the agreement to force the buyer to close.
The law on MACs
In Canada there is virtually no case law on what constitutes a
MAC, so most M&A practitioners look to the jurisprudence from
Delaware for assistance (where there are several thoughtful and
well-articulated decisions). Not wanting to empower buyer's
remorse at the expense of public shareholders, Delaware courts have
been extremely reluctant to find a MAC to have occurred. In fact,
there is only one case in
