Deal Terms
Last updated
Quick Answer
A contractual provision allowing investors to back out of a deal if the company experiences a significant negative change before closing.
A MAC clause gives investors the right to walk away from a signed term sheet if a material adverse change occurs between signing and closing. This could include loss of a major customer, key employee departure, regulatory action, or significant revenue decline.
In Practice
Between term sheet and close, the startup lost its largest customer (30% of revenue). The lead investor invoked the MAC clause and renegotiated the valuation down 40% before agreeing to close.
Why It Matters
MAC clauses protect investors but create uncertainty for founders. Understanding what triggers a MAC and how to negotiate its scope is important for both sides.
VC Beast Take
A MAC clause is the investor's emergency exit from a deal. It's rarely invoked, but when it is, the founder's negotiating position has usually already collapsed.
A MAC clause gives investors the right to walk away from a signed term sheet if a material adverse change occurs between signing and closing. This could include loss of a major customer, key employee departure, regulatory action, or significant revenue decline.
Understanding Material Adverse Change (MAC) is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Material Adverse Change (MAC) falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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