Donncha O'Callaghan and Ronan O'Gara were both yellow-carded as the Irish province bowed out with an untypical whimper, losing 32-16 in the south of France. England star Jonny Wilkinson punished almost every infringement by Munster in kicking 22 points, while Christian Loamanu and Paul Sackey helped themselves to tries.
McGahan said: "I'm absolutely shattered to be out of the Heineken Cup at this point in the term, especially after a very disappointing performance. I think the first thing was our discipline. Conceding 13 points with two men off the field and a couple of penalties from scrums certainly added to the scoreline. But I think, most of all, our lack of accuracy in trying to put anything together."
He added: "I thought we were very frantic at times, especially in the first half. We had a bit of a dried up source from our set-piece, so we really needed to make sure that we controlled the ball, played in the right areas of the field and put some pressure on them. But unfortunately we weren't able to do that."
Munster, who last failed to reach the quarter-finals in 1998, trailed 16-6 when O'Callaghan was sin-binned for taking a player out off the ball. McGahan admitted that cooler heads were required throughout this high stakes game.
"We really needed to show some patience with regards to getting ourselves in the game and being able to outwork the opposition, which is one of our strong traits. Ill-discipline and a bit of anxiousness adds to the penalties and Wilkinson kicked outstandingly well."
The Australian was also asked if this defeat could mark the end of an era for a squad that has won two Heineken Cups in the past decade.
"That's a very pertinent question and certainly a very realistic one. This group's gone through a lot of time together and we're certainly making subtle changes to the playing group," he said. "I think that's well evident over the last two years but again you need to deal with where we're at. We need to make sure we get results for the rest of the year."
Meanwhile, Toulon's director of rugby, Philippe Saint-Andre, was delighted to see his players qualify for the knockout stages in their first season of Heineken Cup rugby.
"I'm proud of my team for having got out of the 'group of death'. I congratulate the team because they always had belief. I think it's a great day for the club, the city and my players," he said.