The Fine Print That Can Kill Your M&A Deal: MAC Clauses Explained

When you're deep into an M&A deal, there’s one clause that can drastically shift the power balance — but it’s often overlooked until it's too late: the Material Adverse Change (MAC) clause.

Let’s break it down.

What Is a MAC Clause?

A MAC clause allows a buyer to back out of a deal after signing but before closing if something significantly negative — a “material adverse change” — affects the target business. It’s a form of legal insurance. If the business suddenly faces major issues, the buyer isn’t stuck acquiring a company that no longer reflects the original deal.

Why Does It Matter?

MAC clauses are all about navigating uncertainty. And in the world of business, uncertainty is everywhere — think:

• A massive financial loss

• Regulatory upheaval

• The loss of a key client

• A major lawsuit

• An industry-wide economic downturn

But here’s the catch: what counts as “material” is almost always negotiated — and often vague. What’s catastrophic for one deal may be minor in another.

The Risk for Sellers

If a MAC event occurs and the clause is triggered, a buyer may legally terminate the deal. That means the seller loses time, money, and possibly the interest of other potential buyers. Worse, the seller might end up in court trying to prove the change wasn’t “material.”

Too broad a clause can leave the seller in a constant state of uncertainty. Too narrow, and the buyer may not be adequately protected.

Common Pitfalls in MAC Clauses

• Relying on boilerplate language

• Failing to define “material” with precision

• Ignoring carve-outs (e.g., excluding general economic downturns or industry-wide issues)

• Not considering long-term vs. short-term impacts

How to Protect Your Deal

Be specific. Define what constitutes a MAC with clear, deal-specific language.

✔️ Use carve-outs. Clarify what doesn’t count (e.g., pandemics, inflation, or geopolitical risks).

✔️ Plan for negotiation. Understand that both sides will fight to shape this clause to their advantage.

✔️ Seek legal guidance. M&A isn’t the time to DIY your legal terms.

Final Thought

MAC clauses may seem like just another line in a long contract, but they hold enormous power. Whether you're buying or selling a business, the way your MAC clause is drafted could mean the difference between a smooth transaction and a costly legal battle.

At Serna Legal Services, we help entrepreneurs and business owners navigate M&A deals with clarity, confidence, and protection. If you’re preparing for a sale or acquisition, let’s make sure the fine print doesn’t derail your deal.

Reach out to us to review or draft your next agreement.

Please contact Serna Legal Services at 312-601-9859 or info@sernalegalservices.com if you’d like to learn more about protecting your business's trade secrets. If you’re ready to protect your trade secrets, we can work with you to help you protect your valuable intellectual property!

This content is published by Serna Legal Services, LLC and is available for informational purposes only and is not considered legal advice on any subject matter. By viewing this content, the reader understands there is no attorney-client relationship between the reader and the publisher. The content should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation