The buyer wants to insert an MAC clause in the purchase agreement that triggers if we lose a single Tier 2 customer during the transition period. How do we tighten the definition of an MAC to ensure they cannot walk away or renegotiate at the eleventh hour?

Question

Tyler Smith · Accepted Answer

A loosely drafted Material Adverse Change, or MAC, clause is a massive liability that allows a buyer to walk away or re-price the deal at the eleventh hour. Buyers love broad language that triggers a MAC if the business experiences any downturn, including the loss of a single customer. To protect your valuation during the transition from LOI to close, you must negotiate a highly specific, quantitative definition of what constitutes a material change.

- First, set a high percentage threshold for revenue or EBITDA decline, typically ten to fifteen percent, measured over a trailing three-month period, before a MAC can be declared.

- Second, explicitly exclude industry-wide economic downturns, changes in interest rates, or general market conditions that affect your competitors equally.

- Third, stipulate that the loss of individual customers does not trigger a MAC unless that loss directly results in a permanent drop in EBITDA exceeding your agreed threshold.

By tightening these definitions, you prevent the buyer from using normal business volatility as an excuse to renegotiate. This keeps both parties focused on the goal line, ensuring that the operational momentum you track in your weekly Level 10 Meetings™ remains focused on closing the transaction rather than managing buyer panic.