MAC Clause (Material Adverse Change)
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A credit-agreement or M&A provision allowing a lender or buyer to exit the commitment if a 'material adverse change' occurs. Rarely successfully invoked given the high legal bar but valuable as negotiation leverage.
MAC Clause (Material Adverse Change) in plain English
A MAC clause is an escape hatch written into a loan or buyout deal: if something genuinely terrible and unexpected happens to the target company before the deal closes, the lender or buyer is allowed to walk away instead of being forced to hand over the money. The phrase 'material adverse change' just means a big, damaging shift — not a bad week, but something that really breaks the story the deal was built on. In practice courts almost never let anyone actually use it, because the bar for 'material' is set sky-high, so its real power is as a bargaining chip: 'renegotiate with me, or I invoke the MAC.' It's like a return policy so strict it's nearly impossible to use — but just having it makes the seller nervous enough to deal.
Also called: Material Adverse Change
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