In general, the provisions of the MAC were interpreted in a restrictive manner and there was a strong reference for the finding of the appearance of an MAC (as explained below, there was only one case in which a Delaware state court found that an MAC had appeared to allow the termination of a merger agreement). At the same time, the COVID 19 pandemic seems to be a truly unique event, with the potential to have an extreme impact on business – and it is probably different from the types of events that the courts have evaluated in the past with respect to mac rules. It is not possible to determine in general whether the COVID 19 pandemic is a MAC, since the analysis depends in any event on the specific wording of the disputed provision and its impact on the company concerned. It is important that the assessment can evolve over time as the pandemic does not dissipate in the short term. It should not be forgotten that the COVID 19 pandemic can also affect many other agreement provisions. B such as the reduction of representations and guarantees (some of which are not subject to the MAC standard), agreements to work in the normal course, deadlines and others. “materiality” and “permanent substance.” In Delaware as in New York, there is usually a high bar for detecting a MAC, with an emphasis on the language of the destination and the specific facts and circumstances. For both merger and financing agreements, courts have generally required the amendment to be “substantial” and “hard.” There is no test of the light line. A significant change is a change that is serious, not a “blip.” A significant change over a period of time is a change that is reflected “over an economically reasonable period, measured not in months, but in years.” As stated in Akorn, the focus is on whether there has been “a negative change in the activities of the objective that, from the perspective of a reasonable long-term investor, would have an impact on the long-term profitability of the business” – that is, a change (generally based on business-specific and non-sectoral factors) that would be essential from a reasonable investor`s point of view.
In New York cases, the courts considered “whether the alleged adverse amendment was in the parties` consideration at the time the agreement was implemented, whether it was under the control of the parties, and what the impact was on the activities of the party concerned” (In re Lyondell (Bankr). S.D.N.Y. 2017) Take systemic risks. In Akorn, the MAC provision (as typical of purchase contracts) explicitly excluded the effects of “pandemics, earthquakes, floods, cyclones, tornadoes or other natural disasters, weather events, force majeure events or similar events.” The Tribunal found that these events were typical “systematic risks” and that the parties generally posed these types of risks to the purchaser because they are “out of the control of all parties (although one or both parties may be able to take steps to mitigate the effects of such risks) and … Companies that go beyond the shares of the transaction. On the other hand, according to the court, the seller will often be assigned risks specific to the company, because “he is better able to prevent such risks… and has a superior knowledge of the likelihood of achieving such risks that cannot be avoided. According to this rationale, the party who assumes systemic risks (the purchaser) would generally assume the risks associated with COVID-19 (except to the extent that the objective was disproportionate to other players in the sector) – and, according to the Delaware courts, as Akorn was told, there are good political reasons for this result.