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Material adverse change (MAC)

What is a material adverse change?

A material adverse change (MAC), also known as a material adverse effect (MAE), is a substantial negative change in a company's business prospects, financial condition, or operational results. In legal contracts, a MAC clause provides a way for a party to back out of a deal if a significant negative event occurs that affects the other party's value.

The specific definition of a MAC can vary depending on the agreement and jurisdiction, but it generally covers serious events that could impact a company's ability to fulfill its obligations under a contract. It's important to note that MAC clauses can be contentious points in negotiations, and their interpretation can sometimes lead to legal disputes. Therefore, the terms of a MAC clause should be carefully considered and precisely defined during the deal-making process.

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