Material Adverse Change (MAC)

A Material Adverse Change clause — usually called a "MAC" or sometimes "Material Adverse Effect" — is the contractual escape hatch that lets the buyer terminate the deal if the business suffers a major negative event between the signing of the purchase agreement and the actual closing. The classic examples: a key customer cancels their contract, a major lawsuit gets filed, regulatory approval that was assumed gets denied, or revenue drops materially below expectations. MAC clauses are heavily negotiated because the definition of "material" is the entire ballgame. A loose definition lets the buyer walk for almost any reason. A tight definition limits them to truly catastrophic events. The clause exists because most deals have a 30–90 day gap between signing and closing — long enough for things to go wrong.

The MAC clause is the contractual escape hatch that lets the buyer walk away or re-trade if something major goes wrong between LOI and closing — and the definition of "material" is the entire ballgame.