When MACs Don’t Cut It: Mayne Pharma [2025] NSWSC 1204

Lizzie Brown

The Supreme Court of New South Wales’ decision in Mayne Pharma Group Limited [2025] NSWSC 1204, delivered by Justice Ashley Black in October this year, provides one of the clearest Australian authorities in recent years on the operation of material adverse change (MAC) provisions in public M&A deals. The case arose from a high-profile dispute between Mayne Pharma Group Limited, an ASX-listed pharmaceutical manufacturer, and Cosette Pharmaceuticals, Inc., a US-based buyer that sought to walk away from its agreed acquisition. 

Transaction Background 

On 20 February 2025, the parties entered into a Scheme Implementation Deed (SID) under which Cosette agreed to acquire all Mayne shares for A$672 million. The agreement included a MAC clause triggered if any event or circumstance was “reasonably expected to have the effect of diminishing the consolidated Maintainable EBITDA… by at least A$10.76 million”.  

Two developments dominated the dispute: 

• Mayne’s Q3 FY25 sales underperformance relative to its internal forecasts;  

• and an FDA “untitled letter” dated 28 April 2025 raising concerns about promotional claims for Mayne’s contraceptive product Nextstellis. 

Cosette asserted these collectively met the MAC threshold. Mayne rejected the claim and sought declarations that the SID remained binding. 

Early Conduct and the First Hearing 

A turning point in the Court’s analysis was Cosette’s approach at the first scheme hearing on 15 May 2025. Despite already knowing of the weaker sales results and the FDA letter, Cosette supported the scheme, executed amendments to the SID, and represented that it remained committed to the agreed timetable. 

Justice Black highlighted the significance of this conduct, observing that Cosette had “not, at that stage, indicated any intention to rely on the MAC clause or to distance itself from the SID’s obligations.” This behaviour was central to Mayne’s argument that Cosette had elected to affirm the contract. 

Two days later, on 17 May 2025, Cosette issued a MAC Notice, followed on 4 June 2025 by a First Termination Notice asserting that the SID had come to an end. Cosette also counterclaimed for a break fee or damages, and alleged misleading or deceptive conduct. 

The Court’s Analysis of the MAC Clause 

Justice Black concluded that no MAC had occurred within the meaning of the SID. The Q3 earnings shortfall was A$8.618 million, below the A$10.76 million threshold. More importantly, Cosette relied heavily on downward forecast revisions rather than demonstrated financial deterioration. 

His Honour made several key clarifying statements: 

• Forecast changes do not equal financial impact:
  “A comparison of forecast earnings at different times does not establish a decline in a company’s actual financial performance.” 

• Forecasts are only estimates:
  “A change in [Mayne’s] forecast does not, in itself, have any diminishing effect on EBITDA… but only indicates an estimate, at a point in time, of the impact of other matters.” 

Justice Black also found insufficient evidence that the FDA letter or the resulting marketing amendments would materially diminish Maintainable EBITDA within any relevant 12-month period. A reasonable person, his Honour said, “would not expect these matters to have a material effect on the price or value of Mayne’s securities.” 

Election and Affirmation 

Even if Cosette had established a MAC, Justice Black found that its own conduct prevented it from terminating the SID. Cosette had: 

• executed an Amendment Deed (1 April 2025) confirming the SID remained “in full force and effect”; 

• executed a Deed Poll for Mayne shareholders (9 May 2025); and 

• supported the scheme at the 15 May 2025 hearing without reserving termination rights. 

These “Affirming Actions,” his Honour held, constituted an election to continue with the contract. Despite anti-waiver provisions, Cosette’s conduct was “objectively inconsistent” with later seeking to terminate. 

Key Takeaways 

The case confirms the high evidentiary burden required to enliven a MAC clause in Australian public M&A. Parties must demonstrate with objective financial evidence that an event has caused, or is reasonably expected to cause, the specific quantitative impact set out in the contract. As Justice Black’s reasoning illustrates, missed forecasts, shifting expectations or regulatory noise are not enough. A MAC must reflect real and measurable financial deterioration. 

The decision also underscores that buyer conduct matters. Continuing to perform obligations or progressing a transaction after becoming aware of potential MAC triggers may amount to an affirmation of the contract. 

In short, Mayne Pharma confirms that a MAC clause is no cure-all for buyer’s remorse. As Justice Black’s decision illustrates, you can’t walk away from a deal just because the “trend forecasts” dipped, much like you can’t return a pair of shoes simply because someone predicts they might go out of style next season. A MAC remains a narrow, strictly interpreted protection, reserved for genuine, quantifiable adversity.