Material Adverse Change (MAC) Clause
A provision allowing a buyer to terminate an M&A agreement if a significant negative change occurs in the target's business between signing and closing.
MAC clauses (sometimes called Material Adverse Effect or MAE clauses) are among the most negotiated provisions in M&A agreements. They define the conditions under which a buyer can walk away from a signed deal without paying a termination fee, because something materially negative has happened to the target.
The scope of a MAC clause is determined by its definition — which events are included, which are excluded (regulatory changes, market-wide conditions, acts of war), and what threshold of severity triggers the clause. Courts have historically set a high bar for MAC claims, with Delaware courts finding MAC events only in cases of long-term, fundamental impairment.
For deal teams, AI-powered MAC clause extraction across the purchase agreement and all material contracts surfaces the exact language in each document, enabling rapid comparison of MAC definitions across the transaction structure.
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