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Mythical Adverse Effect

By  |  June 12, 2023

By: Naveen Thomas (CLS Blue Sky Blog)

The definition of material adverse effect (“MAE”) in mergers and acquisitions agreements has become one of the most extensively debated, litigated, and analyzed provisions in contracts. Over the past two decades, its average length has nearly tripled as lawyers meticulously negotiate and scrutinize every aspect in deal after deal.

However, in an upcoming article, I propose that the persistent drive to customize MAE definitions is ultimately inefficient and counterproductive. According to Delaware law, standardized clauses could offer the same advantages as customized ones, eliminating the significant but often overlooked costs associated with lengthy negotiations. Rather than getting caught up in the fine details and disputes surrounding MAE definitions, lawyers could enhance their effectiveness by directing their limited leverage towards other contract provisions that serve their objectives…

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