Wednesday, February 4, 2009

Material Adverse Change - The Fall of the BCE Deal

A little while ago, the BCE deal fell apart particularly because of something called the Material Adverse Change (MAC) clause of the M&A contract. What is an MAC? It is a legal provision found in acquisitions contracts and venture financing agreements that enables the acquirer to refuse to complete the acquisition if the target suffers such a change. The Financial Post has a interesting article about the specific clauses in the BCE deal.

To better understand how MAC affects deals, Jack Welch gives a great description of what affects M&A deals, MAC and how deals are put together.

An interesting question to ask is now that the BCE acquisition by OTPP is dead, would you consider buying BCE? The stock is now trading in the mid 20's although it hit highs in the 40's during the take over deal. Is it still a good buy?

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