Also known as: MAC · MAE · material adverse change · material adverse effect · material adverse change clause · material adverse effect clause · MAC clause · MAE clause
Written by attorneys · grounded in primary & secondary sources — see below
A contractual clause in acquisition agreements permitting a party to terminate the deal if a material adverse change or effect occurs in the target's business or financial condition between signing and closing.
Select any source to read its text and confirm it supports the definition.
Marcus Mitchell represents Millennium Media in ongoing contract negotiations. After discovering the client's intent to pursue a fraudulent scheme, Mitchell seeks to withdraw. The withdrawal proceeds because it can occur without material adverse effect on the client's interests in the pending matters.
Melissa Mills serves on the board of a legal services organization while representing Metro Bank. The organization considers a policy decision that would directly impact Metro Bank's pending litigation. Mills abstains because the decision could have a material adverse effect on her representation of the bank.
Mosaic Retail agrees to acquire Morgan Financial under a signed merger agreement containing a MAC clause. Before closing, Morgan Financial loses a major regulatory license that halves its projected revenue. Mosaic Retail invokes the clause to terminate, claiming the loss constitutes a material adverse effect on the target's business.
The buyer must demonstrate that the change has had a material adverse effect on the target's business or financial condition since the reference date in the agreement. Courts examine duration, magnitude, and whether the effect was foreseeable or carved out in the contract.
Supporting sources
…services of Martha Stewart, and any negative market or industry perception arising from that diminution or loss, would have a material adverse effect on our business .... Martha Stewart remains the personification of our brands as well as our senior executive and primary creative force. 17. The prospectus for the public offering also…