The Material Adverse Change clause (MAC clause, or Material Adverse Effect — MAE) is a contractual provision in an SPA allowing the acquirer to refuse to close a transaction if, between signing and closing, an event occurs that has or is reasonably likely to have a material adverse effect on the target's business, financial condition, results of operations, or prospects. The MAC clause is the buyer's last-resort protection against catastrophic deterioration of the target between signing and closing, and is one of the most heavily negotiated provisions in any M&A transaction.

The key issue is the definition of "material adverse change": French and Swiss M&A practice typically includes carve-outs excluding from the MAC definition: general economic or market conditions, industry-wide downturns, changes in applicable law, acts of God or force majeure, and consequences of the transaction announcement itself. The buyer's ability to invoke the MAC is therefore limited to target-specific deteriorations that are not covered by a carve-out — a high legal threshold that has rarely been successfully invoked in European courts.

The COVID-19 pandemic tested MAC clauses extensively: most European courts found that pandemic-related downturns fell within the general market conditions carve-out and did not constitute a MAC, reinforcing the high threshold for a successful MAC invocation. For acquirers, negotiating narrow carve-outs (or adding specific triggers) is therefore essential to make the MAC a meaningful protection rather than an illusory right.

At Hectelion, we advise on MAC clause drafting and negotiation in our M&A advisory mandates, ensuring buyers have meaningful protection in Franco-Swiss transactions.