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Parsing the MarkWest-MPLX Material Adverse Effect Clause: Part 2



Material adverse effect clause

As we saw in part 3 of this series, the material adverse effect clause discusses the events that can terminate the deal between MarkWest Energy Partners (MWE) and MPLX (MPLX).

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The MAE clause, paraphrased

As a general rule, MAE clauses follow a similar format. Nearly everything that has a material adverse effect on the company will be considered an MAE, but there are exceptions to that rule.

Please note that the MAE clause with bullet points has been paraphrased below to limit the legalese. My comments are in italics. You should still read and understand the actual language in the merger agreement.

Material Adverse Effect” means, when used with respect to a Person, any change, effect, event, or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), or results of operations of such Person and its Subsidiaries, taken as a whole; provided, however, that any adverse changes, effects, events, or occurrences resulting from or due to any of the following will be disregarded in determining whether there has been a Material Adverse Effect:

  • changes, effects, events or occurrences generally affecting the United States or global economy, the financial markets, or regulatory conditions or changes in the industries in which such Person operates (In other words, a recession isn’t an MAE.)
  • the execution, announcement, or pendency of this Agreement or the consummation of the transactions contemplated hereby (In other words, if a major MarkWest customer decides it doesn’t want to deal with Marathon Petroleum, it isn’t an MAE.)
  • any change in the market price or trading volume of the limited partnership interests of such Person (it being understood that any facts or occurrences giving rise to should be taken into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect) (In other words, the big drop in MarkWest’s stock price isn’t an MAE in and of itself; however, the reason for it may be.)

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