If you’re selling a business in Australia, the deal you sign should be the deal that settles. A court has just confirmed that a buyer can’t use one soft quarter to walk away. For sellers, the protection is in the walk-away clause in your business sale contract.
Today in numbers
- $7.40a share: the agreed price in the Mayne Pharma deal the buyer tried to exit
- $10.76mfall in yearly earnings needed to trigger the walk-away clause
- ~$14.4mcosts the buyer has already paid towards the seller’s first-instance case
- 11 Nov 2026deadline for the buyer to decide whether to seek a High Court appeal
Walk-away clauses: what the Mayne Pharma ruling means for business sales
Deal termsNSW
Court of Appeal: buyers can’t use a slow quarter to walk away
On 14 October 2026 the NSW Court of Appeal unanimously dismissed US buyer Cosette Pharmaceuticals’ appeal over its $7.40-a-share deal for ASX-listed Mayne Pharma. Cosette had tried to end the deal after Mayne reported weaker sales. It argued the business had suffered a “material adverse change” (MAC).
The walk-away clause only applied if Mayne’s yearly earnings fell by at least $10.76 million over 12 months. Both sides’ accounting experts found that cost savings brought the shortfall below that threshold. Cosette argued those savings should be ignored because they came from management decisions. The court disagreed and said all of an event’s financial effects must be counted, including the savings.
The court also found that Cosette had confirmed the deal by supporting the scheme at its first court hearing while already knowing the facts it later relied on. Mayne says Cosette has until 11 November 2026 to decide whether to seek special leave to appeal to the High Court. Mayne is also pursuing damages claims.
Sources: The Lawyer Magazine Australia, 19 October 2026; Gilbert + Tobin, 14 October 2026; Mayne Pharma ASX announcement, 14 October 2026.
Why it matters: this was a large listed deal, but the same issue comes up in private sales of $3 million to $15 million businesses across Victoria, NSW, Queensland, SA and WA. If trading dips between signing and settlement, a loosely worded contract invites a buyer to renegotiate or walk. The courts set a high bar for a buyer to prove a material adverse change, especially when the contract spells out the earnings measure and the dollar threshold.
How to protect your sale price: two steps for business owners
- Define the walk-away clause tightly. Name the earnings measure, the dollar threshold and the time period. Vague wording favours the buyer.
- Keep trading strongly until settlement. Up-to-date monthly accounts and a clear explanation of any dip make it harder for a buyer to argue the business has changed.
Next step: have your lawyer and adviser check the clause wording before you sign.
Frequently asked questions about walk-away clauses
What is a walk-away clause in a business sale contract?
A walk-away clause, often called a material adverse change (MAC) clause, lets a buyer end the contract if something seriously damages the business before settlement. A well-drafted clause sets a clear test, such as a set dollar fall in earnings over a set period, so both sides know where the line is.
Can a buyer pull out of buying my business if sales drop before settlement?
Only if the contract allows it. Most private sale contracts set conditions such as finance, due diligence or a material adverse change. The Mayne Pharma decision shows courts apply these clauses strictly and look at the whole financial effect, including cost savings. Have your lawyer and adviser check the wording before you sign.
Thinking about selling or valuing your business?
I’m Shweta Sharma, a business broker, M&A adviser and Registered Business Valuer with Accelerate Business Sales. I help owners of established Australian businesses prepare for sale, understand their value and negotiate deal terms that protect the price, working with clients across Victoria, South Australia, NSW, Queensland and Western Australia. Book a business valuation, request a confidential appraisal or read more in our Knowledge Centre.
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General information only, not financial, legal or tax advice. Figures are as reported by the sources named, as at the dates shown. Images are illustrative. Speak to your own adviser before acting.
