The coronavirus pandemic is spurring some private equity firms to assess whether the issue qualifies as a material adverse change, a law firm has warned.

Speaking in a webinar on Thursday, Tim Blakely, a Hong Kong-based managing partner at law firm Morrison & Foerster, said clients had sought assistance in understanding whether MAC clauses – which can relieve buyers of an obligation to honour a deal – had been triggered by the virus.

“[They’re asking] either because they’re considering invoking it themselves or they’re concerned that the counterparty will,” Blakely said. He added that whether covid-19 qualifies as a MAC depends on the language of the clause, which often requires that the asset has suffered disproportionately relative to the industry.”

“Courts are very sensitive to not rewarding buyers’ remorse,” Blakely said. “Right now it may be hard for companies to establish that hardship arising from the virus will have a long-term impact or is disproportionate to their business, because we’ve seen stock valuations come down very significantly in recent weeks and economic indicators turn down in a way that’s affecting a broad swathe of the economy.”

Typical MAC clauses legislate for events or circumstances that could be expected to have a material adverse effect on the business, financial condition or results of operations, according to a Morrison & Foerster client alert. Counterparties typically negotiate for several carve-outs from this broad definition as sellers wish to narrow what the buyer considers a MAC.

Marcia Ellis, another Hong Kong-based partner at the law firm, said in the webinar: “People constantly push for specific thresholds that need to be met, because the real problem with these clauses is that courts are very reluctant to find a MAC has occurred and the bar is set very high. Sellers are going to push very hard against any such changes and they may actually negotiate to explicitly exclude MAC clauses so they don’t have to deal with this concept.”

Ellis noted that buyers are pushing for an ability to delay the closing date when there is an expected or potential MAC so that they have more time to assess the damage.

Labour and movement have suffered major disruption as a result of coronavirus. On Friday, President Donald Trump’s administration will suspend travel to the US from the European Union’s Schengen area in an attempt to curb the spread of covid-19. The area does not include Bulgaria, Croatia, Cyprus, Ireland and Romania, or the UK, which formally left the EU in January.

Ellis added that Morrison & Foerster had recently worked on an “unusual” investment into a Chinese retail business in urgent need of cash that closed before the buyer was able to perform due diligence. The law firm’s client, a Hong Kong-based manager, has a put right with the business’s founder that will allow it to exit the investment if it is unsatisfied.

Coronavirus has roiled global markets and spurred talk of a downturn. The Dow Jones Industrial Average closed 20 percent below its February peak on Wednesday, ending a historic 11-year run and entering bear-market territory.

Blackstone last month warned that coronavirus could impact the performance of its funds as the effects of the pandemic continue to disrupt the global economy. The coronavirus “presents material uncertainty and risk with respect to our and our funds’ performance and financial results,” the firm noted in a regulatory filing.