As detailed below, the decision of his Honour Justice Black in Mayne Pharma Group Limited [2025] NSWSC 1204 provides useful guidance for those dealing with alleged material adverse changes in M&A transactions.

Background

Although the facts of the case are very detailed, the key facts were as follows:

• Mayne is an Australian ASX listed public company with a significant business presence in Australia and the United States.
• Following a due diligence period, on 20 February 2025, the US-based Cosette Parties entered into a Scheme Implementation Deed (SID) to acquire all shares of ASX‑listed Mayne Pharma Group Limited for A$672 million by way of a scheme of arrangement.
• The SID included a MAC clause defining a “Mayne Material Adverse Change” as ‘any event, occurrence, change, circumstance or matter‘ that had or could be reasonably expected to reduce the consolidated Maintainable EBITDA over 12 months by $10.76 million, subject to carve-outs for disclosed matters.
• In April 2025, Mayne reported softer-than-expected sales and received a letter from the US Food & Drugs Administration (FDA) which raised concerns regarding Mayne’s promotion of one of its products, Nextstellis.
• At the first court hearing relating to the scheme of arrangement on 15 May 2025, Cosette continued to support the application, entered into deed amendments, and remained bound by its obligations under the SID.
• On 17 May 2025, Cosette issued a MAC notice.
• On 4 June 2025, Cosette sent a notice purporting to terminate the SID (First Termination Notice), citing earnings decline and the FDA letter.

The decision

Mayne commenced proceedings in the Supreme Court of New South Wales, in which Mayne sought declarations that the MAC notice was not validly issued and that Cosette did not validly terminate the SID as no MAC event arose from the Mayne’s Q3 FY25 sales performance or the issuing of the letter by the FDA.

By cross-summons filed on 13 June 2025, Cosette sought a declaration that it had validly terminated the SID and sought an order that Mayne pay it a break fee pursuant to the terms of the SID.

On 15 October 2025, Justice Black delivered judgment. His Honour made the following findings:

• A change in Mayne’s forecasts did not, in itself, have any diminishing effect on Mayne’s EBITDA for the purpose of satisfying the quantitative threshold required by the MAC clause. The forecasts were merely a point in time estimate of matters that may affect Mayne’s Maintainable EBITDA, rather than evidence of a change in Mayne’s actual financial position. The forecasts were not an ‘event, occurrence, change, circumstance or matter’ that had or could be reasonably expected to reduce the consolidated Maintainable EBITDA to the required degree.
• The relevant quarterly forecasts indicated a decline in product sales, however Justice Black found that the comparison of forecasts does not allow the quantification of such a decline. Without evidence of a precise quantification of a decline, Cosette was unable to establish the actual occurrence of a MAC event.
• The FDA Letter was not, by itself or in combination with the changes in Mayne’s forecast, a MAC event. His Honour observed that neither party sought to establish whether the FDA was right or wrong in the views that it expressed in the letter. Therefore, the materiality of the letter turned on the fact that it was a communication from a regulator that expressed certain views which may or may not have been correct and, more fundamentally, on its impact upon continuing sales of Nextstellis and upon Mayne’s business, earnings and profitability.
• Cosette was unable to establish that the FDA Letter had negatively impacted continuing sales of Nextstellis or Mayne’s business, earnings and profitability to the degree required by the quantitative threshold of the MAC Clause. The evidence led by Cosette was also unable to establish that any depreciation in sales or reduction in its Maintainable EBITDA was connected to the FDA Letter or the marketing of its products, rather than ordinary developments of the US economy.

In light of the above, the Court found that Cosette’s purported termination was invalid and the SID remained enforceable.

Since the judgment was handed down, Treasurer Jim Chalmers on 21 November 2025 announced that Cosette’s $672 million takeover of Mayne would be blocked following advice from Commonwealth Treasury and the Foreign Investment Review Board, on national interest grounds. This occurred after Cosette threatened to close a drug facility in Adelaide. Risks relating to the supply of critical medicines were cited by the Treasurer. This ultimately meant that whilst Cosette’s termination of the SID was held to be invalid, it did not need to proceed with the acquisition.

Key take aways and implications

The decision provided useful guidance for dealmakers in drafting MAC clauses, together with the circumstances in which a party may seek to rely on a MAC clause.

1. High Bar for MAC Claims

A quantitative MAC clause demands causal, objective proof meeting or exceeding the threshold. Cosette failed to isolate specific events that reduced EBITDA by $10.76 million.

MAC clauses should be drafted with precision, include clear financial thresholds/metrics, measurement periods, baselines, carve-outs for known risks, specify whether forecast changes qualify and potentially state categories of matters that qualify.

Buyers looking to protect themselves should consider alternative protections including conditions precedent or price adjustment mechanisms, rather than relying solely on MAC clauses.

2. Forecast Variances Are Not ‘Changes’

Underperformance against forecasts, even when revised down, is considered evidence of underlying issues, not a standalone MAC. Evidence of actual financial performance must be assessed by reference to the terms of the MAC provision in question.

3. Effectiveness of Disclaimers and Warranties

Disclaimers about forecasts were effective and broader ‘reasonable care’ warranties did not override specific exclusions for forward-looking information. Including robust disclaimers can limit subsequent claims.

Warranties as to due diligence materials did not amount to a guarantee of the accuracy of every document or statement in the data room. Rather, the representation and warranty as to the collation and preparation of the “Due Diligence Material” extended to the information in the data room as a whole rather than to each document contained in that material read individually.

4. Waiver Through Conduct

By continuing to support the scheme, making amendments, and not asserting termination rights prior to the first court hearing in relation to the scheme, Cosette was deemed to have affirmed the SID and made an election which was inconsistent with its right to terminate. Parties with a right to terminate need to exercise caution about acting in a way that may be inconsistent with such rights or otherwise risk losing the right to terminate.

For further guidance on MAC clauses, managing post-signing risks or post-transaction disputes, please contact our team.

This article was written by Polat Siva, Partner, Ashley Holland, Partner, Jeremy McCarthy, Partner, and Rebecca Kelly, Senior Associate.