NEW YORK (Reuters) - Many companies negotiating mergers and acquisitions (M&A) contracts are haggling over whether the global coronavirus outbreak should offer legal grounds for the acquirers to walk away from their agreements, dealmakers say.

FILE PHOTO: People wearing masks after the coronavirus outbreak wait in a line to buy masks as it rains in front of a department store in Seoul, South Korea, February 28, 2020. REUTERS/Kim Hong-Ji

Merger agreements routinely include contractual provisions to protect the parties involved, citing earthquakes, pandemics and “acts of God” as possible ways out of a deal. But with the S&P 500 Index losing close to 12% of its value in the last five days as a result of the outbreak, some companies are asking for specific references to coronavirus in contracts with acquirers, corporate attorneys said.

“The discussion is happening,” said David Gibbons, partner at law firm Hogan Lovells. “Sellers want to carve out the impact of coronavirus, and buyers are pushing back on that.”

Morgan Stanley's MS.N $13 billion all-stock acquisition of trading brokerage E*Trade Financial Corp ETFC.O, announced last week, offered the first example of a specific coronavirus reference in a publicly disclosed M&A contract.

It stipulates that Morgan Stanley cannot use the outbreak as a reason to walk away from the acquisition, unless it can show that E*Trade’s business has suffered a “disproportionate adverse effect.”

Traditionally, most M&A contracts do refer to epidemics or pandemics as potential grounds for an acquirer to abandon a deal, but rarely do they mention a specific disease by name.

“We do expect to see those closing conditions ... to be specifically negotiated on this point around coronavirus,” said Brian Fahrney, global co-leader of law firm Sidley Austin’s M&A and private equity practice.

It is not yet clear whether specific coronavirus references will have any impact on the number of M&A deals that reach completion. A small minority of acquirers has always explored walking away from a deal, or asking for a lower price, when the fortunes of their targets sour, and companies that want a reason not to close on a deal will always find one, lawyers said.

Companies being acquired are arguing that their buyers know already that the coronavirus is out there, and what the impacts on the company are, meaning it is not a reason to break a deal, Gibbons said.

The sellers are saying, “You’re coming in with your eyes open,” Gibbons said.