Impact of Financial Markets Crisis on MAC
Clauses
By Jeffrey L. Rothschild and Thomas
Sauermilch
The financial markets crisis has brought renewed focus to
Material Adverse Change (MAC), or Material Adverse Effect (MAE),
clauses. MAC or MAE clauses are present in virtually all merger and
stock purchase agreements and are often a central feature in
negotiations between the parties. MAC clauses are provisions that
allocate risk in an interim period either between the date of the
latest financials and the execution of a merger or acquisition
agreement or between such execution and the closing of the
transaction. Typically, a MAC closing condition allows either party
to cancel the transaction in the case of, for example, a
"change, event, circumstance or development that has or would
have a material adverse effect on the assets and liabilities,
financial condition or business of that party and its subsidiaries,
taken as a whole." The provisions then enumerate an
