MAC Clauses and Indemnification Provisions in M&A Deals

Structuring Terms to Minimize Transaction Risks and Post-Closing Disputes

Recording of a 90-minute premium CLE webinar with Q&A

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Conducted on Thursday, December 5, 2013

Recorded event now available

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Course Materials

This CLE course will provide guidance to buyers' and sellers' counsel for negotiating material adverse change (MAC) clauses and indemnification provisions in M&A deals. The panel will outline approaches to benefit and protect buyers and sellers and reduce post-closing disputes.

Description

MAC clauses and indemnification provisions are intensely negotiated terms in M&A transactions. Failing to anticipate and address potential changes and risks during the structuring of a deal can result in unintended legal and financial exposure for buyers and sellers.

Indemnification provisions help parties minimize financial loss when a deal goes bad. Counsel negotiating indemnification terms must consider time, subject matter and dollar limitations, escrowed funds, setoff rights, and payment on indemnification. Boilerplate provisions can be dangerous.

Listen as our authoritative panel of deal experts explains the impact of the volatile market on the negotiation of MAC clauses and indemnification provisions, and provides strategies for crafting deal terms that benefit and protect buyers and sellers and reduce post-closing disputes.

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Outline

  1. Negotiating MAC clauses
    1. Be specific about conditions constituting a MAC
    2. Use broadly written MAC clauses only as “backstop” protection
    3. Mention information relied on, such as business or financial projections
    4. Watch language construction
    5. Buyer should include potential adverse events outside of seller’s control
    6. Include broad language to cover unknown risks
    7. Seller should attempt to limit specific carve-outs buyer proposes
    8. Seller might require that it have knowledge of MAC for clause to be enforceable
  2. Negotiating indemnification provisions
    1. Consequential and incidental damages
    2. Fraud exclusion
    3. Purchase price adjustment and double-dipping
    4. Defense of third-party claims
    5. Evaluating and addressing creditworthiness of indemnitors
  3. Financial analysis applicable to determination of a MAC—Delaware courts criteria
    1. Dramatic downturn
    2. Disproportionality
    3. Durational significance
    4. Unknown to the buyer

Benefits

The panel will review these and other key questions:

  • How has the latest trend of lawsuits impacted the negotiation of MAC clauses?
  • What are the most commonly disputed issues in M&A indemnity and what are some effective strategies for resolving them?
  • How can counsel for buyers and sellers best mitigate risk when drafting and negotiating MAC clauses and indemnification provisions?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Partigan, John
John C. Partigan
Partner
Nixon Peabody

Mr. Partigan concentrates his practice in federal securities law matters and mergers and acquisitions. His mergers...  |  Read More

Litvak, Jeff J.
Jeff J. Litvak
Senior Managing Director—Forensic Litigation
FTI Consulting

Mr. Litvak specializes in accounting and valuation matters, assessment of economic damages, analysis of lost...  |  Read More

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