PRINT THIS PAGE Revisiting material adverse change clauses17/01/2007. Source: Weil Gotshal and Manges. Glenn D. West and S. Scott Parel 
Burgers and material adverse change clauses have more in common than the fact that they sometimes share the name Mac, says Weil Gotshal and Manges. Private equity buyers should (but mostly cannot/do not) special order their MACs. During the "Burger Wars" of the 1970s, McDonald’s jingles indelibly imprinted the consistently exact ingredients of their Big Mac sandwich on the memory of an entire generation: "Two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun." Burger King, on the other hand, encouraged its patrons to freely alter the standard ingredients of its Whopper sandwich to suit their preferences, proclaiming that "special orders don’t upset us... have it your way!"
Burgers and material adverse change clauses have more in common than the fact that they sometimes share the name "Mac." While McDonald’s has since adopted a more flexible approach to the preparation of its burgers, the divide between standardization and flexibility that marked the 1970s differences between McDonald’s and Burger King continues to apply to the use of material adverse change clauses in acquisition agreements, except that, in the current market, all the sellers are McDonald’s and there is no Burger King.
In fact, the basic material adverse change clause served up by sellers in an acquisition transaction has changed very little since the 1970s (except for the addition of an ever-expanding list of carve-outs). Deal custom and tradition have enshrined the standard language and woe to the potential buyer that challenges it. The fact that the standard language has been enshrined, however, does not mean that it is well understood by, or actually accomplishes the specific objectives of, all private equity buyers.
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