Material Adverse Change

Public company (and other business) acquisitions can take a protracted period to close.  Thus a merger or acquisition agreement will typically contain a clause that permits the acquirer or merger partner to abandon the transaction or renegotiate price in the event of a material adverse change at the target in the course of the transaction. Because the term ‘material‘ in adverse change is open to interpretation and an acquirer as the transaction closing approaches would be in a very strong negotiating position, such clauses are often closely negotiated with certain likely MACs being specifically defined (especially as to materiality). MACs can also include untoward facts brought to light in due diligence.

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