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 ?
One example is the inclusion of material adverse change clauses in 93% of US deals compared to 13% of European deals.
We will commit, close and rate lock transactions, and there are no material adverse change clauses in loan applications and commitments." In the last few months, NCB has closed a number of commercial real estate loans using our portfolio loan product, including: Applewood Grove Shopping Center, Golden, Colorado ($3,200,000); GreenwichDesbrosses Realty, New York, New York ($1,000,000); Abbey Square Apartments, Richmond, Virginia ($1,925,000); Varina Station, Fuquay-Varina, Northa Carolina ($2,175,000).
Such hazards include the tendency to hedge exposures with different counterparties while underwriting one's own risk on the basis of the net exposure (assuming performance by both the initial derivative and the hedged derivative), and the existence of credit cliffs inherent in downgrade triggers or material adverse change clauses that may invoke termination rights on the part of performing derivative counterparties, but not on the part of the party that suffered the downgrade or material adverse change.
But it also said Marconi had not received any correspondence from banks suggesting it had triggered material adverse change clauses that could threaten its vital credit facilities.
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