AFO · Glossary
Material Adverse Change (MAC) Clause
A contractual provision letting the lender or buyer walk away if the borrower's condition materially worsens between signing and closing.
What this term means in practice
A MAC clause is a contractual safety valve. It lets the lender (in a loan agreement) or the buyer (in an acquisition agreement) walk away from the deal if the borrower's business or the broader market experiences a "material adverse change" between signing and closing. The clause is the reason loan commitments and purchase agreements can survive a months-long process without locking both parties in if the world materially shifts.
The clause's bite depends on how "material" is defined. Some MACs are narrow (a specific covenant breach, a regulatory event, the loss of a named customer). Others are broad and discretionary, which gives the counterparty more room to walk and creates more uncertainty for the other side. Most commercial loan agreements include a MAC; on hotly competitive deals, sophisticated borrowers negotiate to narrow it.
MAC clauses are most consequential in volatile cycles. In a stable market, they rarely fire. In a downturn or a Covid-style shock, they're tested in court — and the case law on whether market-wide vs borrower-specific events trigger a MAC is genuinely unsettled in Canadian and US jurisdictions both.
Where this matters in the catalog
Programs that turn on Material Adverse Change (MAC) Clause.
Conventional Senior Term Loan or Revolver
Cash-flow-underwritten facility from a chartered bank, credit union, or Schedule II lender.
Mezzanine Debt
Second-lien or subordinated debt when senior capacity is exhausted.
Where the definition meets your situation.
The CPA can walk through how this concept applies to your business in twenty minutes — what providers will ask, where the negotiation matters, what the trade-offs actually look like in your numbers.