A Guide To MAC Clauses In M&A Transactions

Introduction

A material adverse change ("MAC") clause (also sometimes referred to as a material adverse event or material adverse effect clause) is a provision commonly found in M&A and lending agreements that aims to give the buyer (or funder) the right to withdraw from the transaction upon the occurrence of certain events which are detrimental to the target company (or borrower).

MAC clauses often feature in public and private M&A transactions. In the context of a public M&A transaction a MAC clause will usually seek to enable a bidder to withdraw its bid if a material adverse change occurs to the business, assets or profits of the target company prior to the bidder announcing its offer and such offer being declared unconditional. In a private M&A transaction a MAC clause will seek to allow the buyer to walk away from the acquisition of the target company if certain events occur which are detrimental to the business, assets or profits of the target company.