The Big MAC: How Should Courts Approach MAC Clauses in Merger and Acquisition Agreements?

clause, the parties eventually renegotiated the deal price, lowering it by 425 million. 7 Fast forward to today and all sorts of socioeconomic events, from natural disasters to pandemics, have lit a fire under corporations seeking to use their MAC clauses as an escape hatch to get out of merger and acquisition agreements. And we can certainly expect more events in the future to similarly persuade corporations to enforce the MAC clause. Therefore, courts in all jurisdictions should work to articulate a uniform understanding of the foundational purpose of the MAC clause. Elucidating-and agreeing on-this underlying purpose will, in turn, help courts form a uniform interpretive approach to MAC clauses. Establishing a consistent interpretive approach to MAC clauses will increase certainty, clarity, and predictability for contracting parties. This Note argues that the best way to understand the foundational purpose of the MAC clause is through a combination of Robert T. Miller's acquirer-focused theory and Gilson & Schwartz's seller-focused theory. Based on this understanding, courts can begin to form a more unified interpretive approach when determining if a MAC has occurred. With this uniform approach in place, contracting parties will have more predictability and certainty when determining if they are facing a MAC that could threaten their agreement. Part I of this Note provides background on how MAC clauses operate in merger and acquisition agreements and reviews the development and usage of MAC clauses as influenced by major events. Part II then surveys the major Delaware case law addressing enforcement of MAC clauses, providing the landscape of the fractured approach to the MAC clause. Finally, Part III argues that to bring predictability and certainty to this area, courts should adopt a uniform understanding of the MAC clause that involves both Miller's and Gilson & Schwartz's theories, but at different steps in the interpretive process. An integration of both theories will provide for an applicable, comprehensive interpretive approach to the MAC clause. I. BACKGROUND INFORMATION ON MAC CLAUSES A. Purpose of MAC ClausesAt the very beginning of any contractual relationship, the involved parties work to strategically structure the transaction to minimize potential losses and maximize potential gains. Carefully detailing this risk allocation is an especially important consideration for large commercial transactions with potentially enormous amounts of money on the line, namely merger and acquisition agreements.