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MAC Clauses and Indemnification Provisions in M&A Deals: Recent Trends in Negotiating and Drafting

Implications of Recent Deal Litigation on the Negotiation of MAC Clauses

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

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Conducted on Wednesday, April 12, 2023

Recorded event now available

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This CLE course will guide deal counsel in negotiating and drafting material adverse change (MAC) or material adverse effect (MAE) clauses and the key indemnification provisions in M&A deals. The panel discussion will include industry trends in deal negotiation and the continuing impact of the Akorn decision.


MAE clauses, which permit the cancellation of a deal under certain circumstances, are intensely negotiated and frequently litigated provisions in M&A transactions. Questions about what constitutes a MAC have been at the center of several disputed deals.

Counsel's failure to anticipate and address potential MAEs and risks during the structuring of a deal can result in unintended legal and financial exposure for buyers and sellers. Further, the failure to coordinate the MAC clause with the representations and warranties clauses and other essential provisions in the acquisition agreement can create several problems.

In addition to MAE clauses, this program will address indemnification provisions in a private company M&A transaction, including current trends in survival periods, basket amounts, indemnity caps, and sandbagging provisions. Indemnification provisions are often the most critical risk allocation provisions in a private company M&A transaction.

Listen as our authoritative panel discusses current trends surrounding the use and interpretation of MAE clauses in M&A deals, strategies for negotiating and drafting the terms, and negotiating and drafting indemnification provisions.



  1. MAE clauses
    1. Overview of the concept of a "material adverse effect"
    2. Provisions where the concept appears
      1. Absence of interim changes representation
      2. Qualifying certain representations
      3. Free-standing "No MAE" closing condition
      4. Bringdown of other representations to an MAE
    3. The MAE definition
      1. The base definition
        1. Underlying predicate events
        2. Expectation and aggregation language
        3. Uncapitalized "material adverse effect"
        4. MAE objects
      2. Exceptions
        1. Systematic risks
        2. Indicator risks
        3. Agreement risks
      3. Disproportionality exclusions
    4. Misunderstandings, mistakes, and pitfalls
      1. Events and effects
      2. Breadth of excepted events
      3. The known risk fallacy
      4. The control group in the disproportionality exclusion
    5. MAEs in contractual provisions reconsidered
      1. Absence of interim changes representation
      2. Qualifying certain representations
      3. Free-standing "No MAE" closing condition
      4. Bringdown of other representations to an MAE
  2. Negotiating indemnification provisions in private company M&A transactions
    1. "Sandbagging"
    2. Survival periods
      1. General survival periods
      2. Exceptions to general survival periods
    3. Scope of indemnifiable damages
      1. Importance of "loss" definition
    4. Indemnification deductibles ("baskets")
      1. Mini-baskets
      2. Tipping basket vs. true deductible
      3. Basket carve-outs
      4. Baskets as percentage of transaction value
    5. Materiality scrapes
    6. Indemnification caps
      1. Caps as a percentage of transaction value
      2. Exceptions to caps
        1. Importance of fraud definition
    7. Third-party indemnification claims
      1. Control of defense
      2. Exceptions to indemnitor's control of defense
    8. Indemnification as exclusive remedy
    9. Indemnification escrows
      1. Escrows as a percentage of transaction value
    10. Reductions against buyer's indemnification claims
      1. Reduction for tax benefits
      2. Reduction for insurance proceeds
      3. Duty to mitigate
    11. Representations and warranties insurance
      1. When appropriate
      2. Underwriting process
      3. Effect on indemnification


The panel will review these and other key issues:

  • How has recent deal litigation impacted the negotiation of MAE clauses?
  • How can counsel for buyers and sellers best mitigate risk when drafting and negotiating MAC clauses?
  • What are the current trends to consider when drafting and negotiating indemnification provisions?
  • How has representation and warranty insurance affected indemnification provisions?


Clingen, Kenneth
Kenneth W. Clingen

Clingen Callow & McLean

Mr. Clingen chairs the firm’s business counseling department. He is general counsel to a number of privately...  |  Read More

Miller, Robert T.
Professor Robert T. Miller

F. Arnold Daum Chair in Corporate Finance and Law
University of Iowa College of Law

Before joining the faculty at the University of Iowa College of Law, Professor Miller was a Professor of Law at the...  |  Read More

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