Material Adverse Change or Effect

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Material Adverse Change or Effect

Many mergers and acquisitions contracts include a material adverse change clause that allows a company to renegotiate or walk away from a deal if the other company or its subsidiaries announces a significant event that may negatively affect its stock price or operations. See also materiality.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Material Adverse Change or Effect

A clause in some merger and acquisition contracts allowing the acquiring to cancel a deal before it is finalized if material information is revealed that negatively impacts the target company's stock price. See also: Due diligence.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
MAC clauses remain relatively rare in Europe (14% of deals): this ensures seller deal certainty.
Central and Eastern Europe sees the most MAC clauses and arbitration is the most likely dispute resolution mechanism in this region.
"The Economics of Deal Risk: Allocating Risk through MAC Clauses in Business Combination Agreements." William and Mary Law Review 50: 2007-2103.
Some acquiring companies have utilized the MAC clause to walk away from a deal because the target became less attractive during the interval period (Herman and Piereck, 2010).
MAC clauses, because they have been interpreted the way they have, you need them but no one should engage in over-reliance on them."
suggest that future MAC clauses will adopt thresholds in readily proven
would suggest that vague MAC clauses yield benefits only by reducing the
Galil, MAC Clauses in a Materially Adversely Changed Economy, 2002 COLUM.
Toub, Note, "Buyer's Regret" No Longer: Drafting Effective MAC Clauses in a Post-IBP Environment, 24 CARDOZO L.
MAC clauses have thus given rise to more litigation than any other provision of merger agreements, and the amounts in controversy in such cases have often been spectacular.
In the past two quarters, lenders have relied upon MAC clauses to change the credit spread, and thus the coupon, after a borrower had rate locked.
In the next edition of Banker Middle East, two years on from the grim days of September 2008, Rodgin Cohen talks about whether Lehman should have been allowed to fall, his views on M&A and MAC clauses and offers the readers of Banker Middle East a few suggestions on what can be done to create a stronger global banking system.