Material Adverse Change (MAC)

A Material Adverse Change (MAC) clause is a provision commonly included in contracts, particularly in mergers and acquisitions (M&A) agreements, loan agreements, and other commercial contracts. The MAC clause allows one party to terminate the contract or renegotiate terms if a significant event or change occurs that negatively affects the business or its financial condition.

In the context of M&A, a MAC clause is often invoked by the buyer if the target company experiences a material adverse event, such as a drastic decline in revenue, loss of key customers, or other factors that significantly impact the company’s value. This clause provides protection for buyers, ensuring that they are not forced into completing a deal that may no longer be favorable due to unforeseen circumstances.