Deal Terms
Material Adverse Change (MAC)
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.
Related Concepts
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