Series 79 practice questioneasyMaterial Adverse Change Clauses
Which of the following is most likely to be excluded (carved out) from the definition of a Material Adverse Change (MAC) in an acquisition agreement?
- AA significant decline in the target company’s revenue due to the loss of a major customer
- BA catastrophic fire at a principal factory of the target company
- CA breach of a key contract by the target company
- DA general deterioration in the U.S. economy affecting the entire industry✓ Correct answer
Explanation
Why D — A general deterioration in the U.S. economy affecting the entire industry
General economic downturns are commonly excluded from MAC definitions because they affect all companies in the industry. This trap tests awareness that MACs are meant to cover company-specific risks, not systemic risks.
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