Material Adverse Change Clauses: The Metrics in Delaware, Plus Drafting and Negotiation Advice

Recent litigation in the Delaware Court of Chancery, including the litigation involving the now-terminated $25 billion Sallie Mae merger, is a reminder in merger and acquisition (M&A) transactions that care should be given in drafting and negotiating material adverse change (MAC) or material adverse effect (MAE) clauses. These clauses are typically intended to permit a buyer to terminate the agreement upon the happening of an event that has a material impact on the seller after the signing of the agreement but before closing.