MAC Clause (Material Adverse Change)
A clause in an acquisition agreement that allows a party to back out of a deal if there is a significant negative change in the target company's business.
Implications
A provision in a contract, particularly in mergers and acquisitions, that allows one party to withdraw from the agreement if a significant negative change occurs in the other party�s business or financial condition, relevant in deal structuring and risk management.
Example
Example: A private equity firm includes a MAC clause in its acquisition agreement, allowing it to back out of the deal if the target company experiences a material adverse change, such as a major regulatory setback or a significant decline in revenue, before closing.
Related Terms
Different from a force majeure clause, which typically covers unforeseen events like natural disasters, a MAC clause specifically addresses changes in business conditions that could affect the viability of the transaction.
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