MAC to the Future: What Mayne Pharma Means for Deal Drafting

The Supreme Court of New South Wales has delivered a significant ruling in Re Mayne Pharma Group Limited [2025] NSWSC 1204, marking one of the most detailed examinations of material adverse change (MAC) clauses in Australian M&A history. It is a decisive moment for deal makers and legal practitioners, confirming that MAC provisions are not exit ramps for buyer’s remorse.

Background

US-based Cosette Pharmaceuticals and Mayne Pharma entered a Scheme Implementation Deed (SID) for Cosette’s acquisition of Mayne in February 2025. The agreement included a provision defining a MAC as:

Any event, occurrence, change, circumstance or matter … which has, has had or is (either individually or when aggregated together with any such other events, occurrences, changes matters or circumstances) reasonably expected to have, the effect of diminishing the consolidated Maintainable EBITDA over a 12-month period of the Mayne Group, taken as a whole, by at least A$10.76 million, other than any event matter or circumstance:

…
(c) Fairly Disclosed in the Due Diligence Material (or which ought reasonably to have been expected to arise from a matter, event or circumstance which has been Fairly Disclosed); …

The SID was signed with Mayne’s shares to be purchased at $7.40 a share. Shortly after the ink had dried on the agreement, Mayne received weaker than expected trading results and received a letter from the US Food and Drug Administration (FDA) concerning aspects of its pharmaceutical production. Cosette sought to argue these developments constituted a MAC, entitling them to terminate the SID. Mayne disputed this right.

Dispute

Cosette issued Mayne a termination notice relying on the MAC clause. It argued it was triggered because:

• A reduction in in Mayne’s financial performance beyond the AUD$10.76 million EBITDA threshold; and
• Receipt of a letter from the FDA concerning Mayne’s oral contraceptive product Nextstellis®.

Mayne rejected this notice, issuing a notice that Cosette did not lawfully terminate the SID. The resulting stand-off between the parties led to the proceedings before the Supreme Court of New South Wales.

The Court’s Findings

Justice Black dismissed the claim, holding that no MAC had occurred and that Cosette was not entitled to terminate the agreement because:

1. A forecast missed is not always a MAC

The Court distinguished between forecast variances and a MAC. A missed forecast is not itself a MAC (adverse change in itself) but only evidence of potential underlying adverse developments. To rely on the clause, Cosette must have been able to point to specific events/matters that have or could reasonably have expected to have the effect of reducing EBITDA by AUD$10.76 million. Thus, short term fluctuations, market volatility and even significant underperformance may not amount to a MAC.

2. Overclaiming reliance on warranties

The Court noted that due diligence warranties with respect to forecasts cannot guarantee accuracy of information. Forecasts must be prepared with reasonable care and skill but equally for those on the buy-side, given the forward-looking nature of the information, they must be reviewed with this in mind – that being, accuracy cannot be guaranteed.

3. Affirmation by conduct

Cosette’s behaviour undermined its termination claim. By entering an amending deed and supporting the scheme at the first court hearing, it acted inconsistently with termination and affirmed the SID. The Court emphasised that an anti-waiver clause cannot override the common-law doctrine of election once a party knowingly acts in a way that affirms a contract.

Practical takeaways

For buyers

• Conduct carries consequences: Be cautious about steps taken that could be viewed as affirming a contract after a potential MAC event.
• Be realistic about the evidentiary burden: Courts will expect detailed financial and operational evidence linking the alleged MAC to actual business deterioration to be able to validly exercise termination rights arising from a MAC.

For sellers

• Disclosure is the best defence: Comprehensive and well-documented disclosures and disclaimers (including forecast disclaimers) are the most effect safeguard against subsequent MAC allegations.
• Well drafted carveouts from MAC that insulate against sector-wide issues, regulatory reviews or supply chain delays.

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