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Coronavirus: MAC clause used to withdraw from £510m property acquisition

Material Adverse Change clause used by buyer of Manchester Airport Group’s Victoria portfolio to withdraw from property acquisition due to Coronavirus

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News sources are reporting that Columbia Threadneedle has withdrawn from its £510m agreement to buy Manchester Airport Group’s Victoria portfolio, despite having exchanged. A Material Adverse Change (MAC) clause in the contract has allowed the fund manager to withdraw from the agreement as a result of the impact of COVID-19.

Financial disputes Partner, Janine Alexander, comments:

Material Adverse Change clauses, along with Force Majeure clauses have taken on great importance for those in the process of completing acquisitions against the backdrop of the global COVID 19 Pandemic. However any action taken based upon them should be approached carefully and with legal advice. Whether the clause applies will depend both on its drafting and the particular sector involved. Some clauses will cover changes on a general economic or sector basis, others will require a change specific to the acquisition target itself.

Triggering such a clause has the potential to lead to many years of litigation. Particular difficulties may arise where MAC clauses in the financing documents for debt finance or equity subscription do not match the drafting in the sale and purchase agreement (or other core documents setting out the terms of the acquisition).

Where deals are about to be completed but are not subject to finance parties could find themselves in a position where the arranged finance is no longer available but completion is still required within a short timescale with insufficient funds available.

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Janine Alexander

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