You signed an agreement to purchase a business, and still have a
few months before closing. New regulations are announced which you
expect will have a significant negative impact on the target's
business. You are starting to get cold feet—can you walk away
before closing?
In M&A transactions, one of the main risks that buyers
grapple with is the risk that the business ultimately delivered on
closing falls short of what the buyer agreed to acquire. The
allocation of this risk between the buyer and seller is negotiated
by the parties, and the material adverse change—or
"MAC"—provisions of the contract are a key
mechanism for risk allocation.
No matter the rigor of pre-signing due diligence efforts, once
the dust has settled post-signing, buyers tend to be faced with one
surprise or another about their newly acquired business. Buyers
routinely negotiate for protections to address these circumstances,
including comprehensive representations and
