Construction of MAC clause in SPA
The Court held that revisions to a target company's profit forecasts during the period between exchange and completion did not trigger a material adverse change ("MAC") clause in a share purchase agreement ("SPA").
The buyer (claimant) argued that the seller (defendant) had failed to comply with the MAC provisions because it had failed to notify the buyer of two "Material Adverse Events" ("MAE"), namely, (i) the fact that the target's actual sales, revenue and operating profit was significantly worse than the seller had forecast and (ii) the fact that the target's management had made revisions to the forecasts in the period between exchange and completion. The Court did not strike out the claim in relation to (i) but it did strike out the claim in relation to (ii) because the forecast revisions were not capable of triggering the MAE notification condition. The forecast revisions did not fall within the MAE definition, which included any "...act or omission, or the occurrence of a fact, matter event or circumstance...". Furthermore, the agreed position was that the seller gave no warranty in respect of the accuracy of financial forecasts so to allow the claim would be contrary to that agreed position.
This case demonstrates that the courts will construe MAC clauses narrowly and in the context of the other terms of the SPA.
Ipsos S.A. v Dentsu Aegis Network Limited  EWHC 1726
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