Material Adverse Change Clauses in M&A Transactions: The Impact of Macroeconomic Events

Mergers and acquisitions (hereinafter M&A) transactions often involve a period between signing and closing, during which the condition of the company being acquired may change before the transaction is completed. Material Adverse Change (hereinafter MAC) clauses are intended to allocate between the parties the risks arising from significant adverse developments during this period. Their application becomes more complex where deterioration results from broader macroeconomic changes, since the same event affecting the market as a whole may have different consequences for individual companies. The key question is therefore whether such deterioration falls within the risk already assumed by the buyer under the transaction or amounts to a change significant enough to affect the obligation to complete the acquisition. This article examines how macroeconomic changes are assessed in the context of MAC clauses and how courts distinguish a material adverse change from ordinary commercial risk. After reviewing the case law developed around MAC clauses, the same issue is considered under Article 422 of the Civil Code of the Republic of Azerbaijan, which governs significant changes in circumstances. The article also puts forward proposals for applying approaches developed in international judicial practice concerning MAC clauses in the Azerbaijani legal context.