A Material Adverse Effect (MAE), sometimes called a Material Adverse Change (MAC), is a contractually defined deterioration in the target business’s condition between signing and completion that, if it occurs, allows the buyer to terminate the deal or refuse to complete. The definition of MAE is one of the most heavily negotiated clauses in any Australian share sale or asset sale agreement.
Broad definitions favour the buyer; narrow definitions favour the seller. Common carve-outs exclude general economic conditions, industry-wide events, and effects flowing from the announcement of the transaction itself.