Material Adverse Change (Mac) Clauses and the $3 Billion Tiffany Vs. LVMH Dispute: When Every Word Counts

Introduction

Funny how something as massive as a billion-dollar merger can hang on a line or two buried deep in a contract. Not the headlines. Not the handshake photos. Just a clause most people skip over—until everything hinges on it.

In late 2019, LVMH made its move. The luxury giant announced plans to buy Tiffany & Co. for $16.2 billion. It was gutsy—the kind of deal that gets analysts talking. Tiffany brought legacy. LVMH had reach. On paper, the pairing looked unstoppable. Then came 2020. And with it, a global shutdown that hit retail like a storm. Stores went dark. Travel froze. Supply chains cracked. Suddenly, the deal looked shaky. By summer, LVMH wasn’t so sure anymore.

They pointed to something rarely used but quietly powerful: the MAC clause—short for Material Adverse Change. Their argument? COVID-19 had hit Tiffany so hard that the company wasn’t the same anymore. Tiffany pushed back. Hard.

What unfolded was more than a legal fight. It was a reminder that in deals like these, language isn’t just legal—it’s everything.

Brief Background: A Marriage of Luxury Giants

Back in November 2019, LVMH—France’s giant in the luxury space, steered by Bernard Arnault—said it was buying Tiffany & Co. They’d agreed on $135 a share, all cash. That pushed the total value to around $16.2 billion[i]. It was set to be LVMH’s biggest deal so far, aimed squarely at growing its jewelry division, especially in key markets like the U.S. and Asia. People didn’t just see numbers—they saw logic. Tiffany had heritage. LVMH had reach. The match seemed obvious. Commentators called it strategic. Elegant, even. By mid-2020, the paperwork was supposed to wrap up. That was the plan, at least—pending approvals from regulators, and of course, Tiffany’s own shareholders. But things rarely go exactly how they’re planned. And in this case, they didn’t.

Then Came Covid-19

By early 2020, everything had changed. As the pandemic swept through cities and shut down borders, the retail world took a direct hit. Luxury stores emptied out. Sales tanked. Shoppers stayed home, unsure of what came next. For a company like Tiffany, built on in-person experience and global travel, the timing couldn’t have been worse.

By June, quiet speculation began to surface—was LVMH getting cold feet? The deal suddenly looked less like a golden opportunity and more like a risk. Three months later, the hesitation became public. In September, LVMH announced it planned to back out. They gave two reasons. First, they argued Tiffany’s performance had dropped sharply due to the pandemic—enough to trigger the Material Adverse Change clause. Second, they pointed to pressure from the French government, which, they claimed, had asked them to hold off because of looming U.S. tariffs.

Tiffany wasn’t having it. They took the matter to the Delaware Chancery Court, calling LVMH’s retreat both strategic and unjust.

The Mac Clause: Legal Battlefield or Bargaining Chip?

At the heart of the dispute was the Material Adverse Change clause, a standard provision in M&A agreements allowing the buyer to terminate the deal if the target suffers a materially harmful event before closing. However, courts—especially in Delaware—apply a high threshold to MAC claims. A buyer must show that the event has caused substantial, lasting harm to the target’s overall business performance, not just temporary disruption.

The Tiffany-LVMH merger agreement specified that Delaware law governed the contract, and the parties consented to the exclusive jurisdiction of the Delaware Court of Chancery for resolving disputes arising from the merger. This meant any legal challenge—including Tiffany’s suit to enforce the deal after LVMH attempted to withdraw—was adjudicated under Delaware’s well-established M&A legal framework, known for its strict and seller-friendly standards on Material Adverse Change (MAC) claims. Delaware’s jurisdiction ensured a fast-tracked, expert handling of the case, with the court exercising equitable powers such as ordering specific performance to enforce contractual obligations. The choice of Delaware was strategically significant, as its sophisticated corporate jurisprudence and specialized forum provided a clear legal environment for interpreting the MAC clause and controlling the merger's outcome.

A critical twist in the Tiffany-LVMH agreement was that certain events—pandemics included—had already been carved out from what counted as a Material Adverse Change. That meant LVMH couldn’t just blame COVID-19; they had to prove Tiffany suffered more than others in the same space. But filings and external data painted a different picture. Tiffany’s sales had slipped, yes—but not disastrously. Against competitors like Cartier and Bulgari, it held steady. The business was impacted, sure—but not disproportionately so.

That presented a challenge for LVMH. In the agreement, both parties had already agreed to exclude certain types of events from qualifying as a MAC. Among them was a pandemic[ii]. So COVID-19, in itself, wasn’t enough. [iii]To rely on the MAC clause, LVMH would need to demonstrate that Tiffany had been hit harder than others in the same market. Not just affected—but disproportionately so.

Moreover, as noted in Sadis & Goldberg LLP’s analysis, Tiffany argued that LVMH’s reliance on the French government’s letter was a strategic attempt to manufacture a legal pretext. Delaware law generally disregards such informal “government pressure” unless it constitutes a legal prohibition, which this didn’t.[iv]

Settlement and Aftermath: A $400 Million Lesson In Precision

As the case dragged on, pressure built on both sides. By the end of October 2020, they came to terms. The deal would still close, just not at the original price—LVMH agreed to pay $131.50 per share, a cut of around $400 million from what was first agreed.[v]

LVMH didn’t walk away, but it didn’t lose the fight either. The MAC clause had served its purpose—as pressure, not escape. By January 2021, the deal closed. Tiffany gained scale through LVMH’s global network. For LVMH, it was the U.S. jewelry foothold it had chased for years[vi]. Analysts noted the move aligned neatly with LVMH’s broader play for growth in Asia[vii].

Why Every Word Matters: Key Takeaways for Dealmakers

1. MAC Clauses Must Be Precise

The LVMH-Tiffany saga demonstrates that MAC provisions cannot be vague. Buyers and sellers must specify what qualifies as a material adverse event and what doesn’t. The inclusion—or exclusion—of just a few words can determine the enforceability of a termination attempt.[viii]

2. Carve-Outs Can Prevent Opportunism

Laying out specific carve-outs—like pandemics, economic shocks, or regulatory trouble—can protect sellers from buyers trying to back away later. If those terms are written clearly, courts tend to hold parties to them, even when pressure builds.

3. Delaware Courts Set a High Bar

Historically, Delaware has sided with sellers in MAC disputes unless there is overwhelming, long-term deterioration in business fundamentals. Temporary disruptions, even large ones like COVID-19, are usually insufficient.

4. MAC Claims Are Often Tactical

LVMH may not have truly believed it could win in court—but the claim gave it leverage. In modern M&A, invoking a MAC is as much about renegotiation as it is about legal termination.

5. Global Events Don’t Always Qualify

Just because an event is disruptive doesn’t make it material in the legal sense. The pandemic was global, but Tiffany’s comparative stability shielded it from the MAC threshold.

Conclusion

The Tiffany vs. LVMH dispute wasn’t just about luxury or valuation—it was a battle over language, leverage, and legal nuance. In an era where black swan events are increasingly common, the MAC clause has evolved from a boilerplate formality into a high-stakes instrument of deal strategy. Whether you’re a corporate lawyer, investor, or executive, this case serves as a compelling reminder: in M&A, every word counts—and some may cost you billions.

But beyond the legal maneuvering, the standoff also exposed something deeper: how uncertainty pushes contracts to their limits. No clause is ever just boilerplate when the stakes are high. As seen here, a few lines of cautious drafting can tip the scale—either shielding a seller or giving a buyer unexpected room to maneuver.

In today’s unpredictable deal landscape, this case serves not just as a chapter from the past, but as both a red flag and a reference point. Precision doesn’t just prevent conflict; it protects value. When the unexpected strikes, what’s written in black and white often decides who holds the stronger ground. And in the world of mergers, that can be the difference between a smooth close and a courtroom showdown.

Author: Krutha Janani M, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[i] Guhan Subramanian, Julian Zlatev, & Raseem Farook, LVMH’s Bid for Tiffany & Co., Harv. Bus. Sch., Case 921-049, 1 (2021)

[ii] Tiffany & Co., Definitive Proxy Statement (Schedule 14A), 86 (Jan. 6, 2020)

[iii] Tiffany Sues LVMH for Reneging on $16 Billion Deal as France Steps In, Reuters (Sept. 9, 2020) https://www.reuters.com/article/world/europe/tiffany-sues-lvmh-for-reneging-on-16-billion-deal-as-france-steps-in-idUSKBN2601IJ/#:~:text=PARIS%2FNEW%20YORK%20(Reuters),impact%20of%20the%20coronavirus%20outbreak. 

[iv] COVID-19’s Effect on M&A Part 2: LVMH and Tiffany & Co., Sadis & Goldberg LLP (Oct. 5, 2020) https://www.sadis.com/insights/covid-19s-effect-on-ma-part-2-lvmh-and-tiffany-co 

[v] Tiffany and LVMH Modify Merger Price, LVMH (Oct. 29, 2020) https://www.lvmh.com/en/publications/tiffany-and-lvmh-modify-merger-price 

[vi] Dominique Muret, Tiffany & Co. Acquisition a Brilliant Bargain for LVMH, Fashion Network (Feb. 7, 2022).

[vii] Why the Acquisition of Tiffany & Co. Is Important for LVMH, Euromonitor International (Oct. 28, 2020) https://www.euromonitor.com/article/why-the-acquisition-of-tiffany--co-is-important-for-lvmh 

[viii] Structuring M&A Agreements: Five Lessons from the Tiffany Co. v. LVMH Affair, Wyrick Robbins (Feb. 22, 2021)https://www.wyrick.com/news-insights/structuring-ma-agreements-five-lessons-from-the-tiffany-co-v-lvmh-affair