Richards Layton & Finger
 

Lessons from the Meltdown: MAE Clauses

Jan-Feb 2009

In most merger agreements, the occurrence of a “material adverse event” (MAE) or “material adverse change” typically allows a buyer to exit the agreement without penalty. In light of the developing meltdown of the financial markets, it is therefore not unrealistic to suggest that most every public merger transaction entered into since mid-2007 has, at one point or another, seen the scrutiny of teams of lawyers parsing the agreement’s MAE clauses at the request of disappointed buyers or nervous sellers 3 After the Delaware Court of Chancery’s decision in Hexion v. Huntsman,4 deal lawyers now have substantial additional learning on the meaning and interpretation of such clauses.