Material Adverse Change (MAC) / Material Adverse Effect (MAE) Clauses

What this video covers

• What a material adverse change (MAC) or material adverse effect (MAE) clause is: the buyer's conditional right to walk from a signed deal if the target's business deteriorates materially between signing and closing
• Why the MAC definition trigger is broad but the carve-outs do almost all the work, including general economic conditions, industry conditions, changes in law, acts of war, terrorism, pandemics, natural disasters, deal-announcement effects, and failure to meet projections
• How risk allocation works: the buyer absorbs macro market risk while the target retains company-specific risk, so a global pandemic tanking sales is usually excluded
• Why a short-term dip or single bad quarter generally does not qualify as a MAC, and the serious-and-lasting standard the buyer must prove
• How deal protections are asymmetric: the buyer gets the MAC clause, but the target does not get a reciprocal MAC right; the target's remedy for a wrongful walk-away is specific performance to force closing at the original price
• Why MAC is rarely invoked successfully in practice, and why buyers prefer to renegotiate price or close as-is rather than risk losing a specific performance lawsuit