Material Adverse Change (MAC)
Definition - What does Material Adverse Change (MAC) mean?
This legal provision is important and essential because, between the date of the agreement and the final completion and closing of the complete transaction, considerable time can lapse due to regulatory procedures, and if any material changes occur meanwhile, making the funding or acquisition, material under rate contract, less attractive, the venture capital provider or the acquirer or any party to agreement, must have the right to back out from the agreement or seek appropriate revision of terms and conditions in some cases.
Divestopedia explains Material Adverse Change (MAC)
- Liabilities and assets
- Properties such as intellectual properties and patents
- Process operations
- Market access including foreign markets
- Licenses and leases, such as mining licenses, spectrum licenses and land leases
A material adverse change clause is also used as a measure to cover risk in commercial agreements, such as long-term sale or purchase agreements for products such as power, natural gas and oils, where the adverse events occurring worldwide could affect any of the parties. The aggrieved parties can have a right to ask for changes in the prices or quantities or other conditions of sale/purchase, based on material adverse change provisions in the agreements.