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Definition

A material adverse change (MAC) clause is included in most major contracts and allows parties to exit the contract or modify it if a something happens which significantly changes the value of the assets that are the subject of the contract. For example, in June 2020, Barloworld claimed an MAC in its deal to buy Tongaat Hulett's starch business for R5,3bn on the grounds that the advent of COVID-19 amounted to a material change in the starch company's value because it resulted in a reduction of its turnover and profitability. Tongaat opposed the action on the grounds that COVID-19 did not amount to an MAC. On 22nd September 2020 an independent expert (Rothschild & Co) found in favour of Tongaat that COVID-19 did not amount to an MAC and so the deal should go ahead.

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