Material Adverse Change (MAC)
The clause that lets a buyer walk from a deal between signing and closing if the target deteriorates.
- Definition of materiality (dollar threshold or qualitative)
- Carve-out scope and exceptions to carve-outs
- Specific trigger events listed
- Determination process and timing
If this clause already feels aggressive in isolation, upload the full contract and see how it combines with payment terms, liabilities, and exit rights.
Analyze My ContractWhat this clause actually does
A material adverse change clause defines what counts as a sufficient deterioration in the target's business between signing and closing to give the buyer the right to walk. The definition is highly negotiated. Sellers want it narrow; buyers want it broad.
Why people get burned by this clause
Between signing and closing (often 30 to 90 days for SBA-financed SMB deals), top customers can churn, key employees can leave, and lawsuits can land. A strong MAC clause is the only off-ramp.
What should make you slow down
- Carve-outs for general economic conditions are unbounded
- Industry-wide carve-outs swallow the rule
- Threshold for materiality is set by dollar amount that is too high
- Specific triggers (top customer loss, key employee departure) excluded
- MAC determination requires litigation rather than a defined process
Where you usually see it
- Asset purchase agreements
- Stock purchase agreements
- Letters of intent
What the platform checks in the live contract
- Definition of materiality (dollar threshold or qualitative)
- Carve-out scope and exceptions to carve-outs
- Specific trigger events listed
- Determination process and timing
- Interaction with reps and warranties bring-down at close
What stronger language usually looks like
- Specific triggers listed (top 3 customer loss, key employee departure, lawsuit over X dollars)
- Carve-outs have exceptions (industry-wide unless target is disproportionately affected)
- Defined determination process within 10 days of trigger event
- Bring-down of reps and warranties at close
Definitions worth opening next
Articles that go deeper
MAC is your only out between signing and closing. List specific triggers and put exceptions inside the carve-outs.
See how this clause behaves in the real contract.
The clause library gives you judgment. The full review shows how this clause combines with the rest of the agreement, then quotes the exact language, scores the risk, and explains what to push on next.