This article is for educational purposes only and does not constitute legal advice.
A surprising number of founders over-index on the material adverse change clause and under-index on the rest of the signing-to-closing machinery.
That is understandable. The MAC clause sounds like the dramatic walk-away right. But in many private deals, the more practical leverage comes from ordinary-course covenants, the bring-down of representations at closing, closing deliverables, debt-financing conditions, and the simple fact that a buyer can weaponize delay if the seller has not managed the interim period carefully.
The right way to read this risk is as a package. A seller that treats the MAC definition as the only battlefield often misses the terms that are more likely to create renegotiation pressure in the real world.
In this guide
- Why a clean no-MAC definition is only one piece of the risk allocation puzzle
- How interim operating covenants and bring-down conditions work together
- What founders should watch after signing and before closing
- A copy/paste checklist for the signing-to-closing gap
Read the entire closing architecture, not just the MAC
Montague already has a broader guide to MAC clauses. The practical founder point here is narrower: even if the buyer cannot prove a true MAC, the buyer may still have leverage if the seller trips an interim covenant, cannot deliver an accurate bring-down, misses a consent, or cannot satisfy a closing certificate.
For sellers, the question is not “Could the buyer win a MAC case?” The question is “What facts can the buyer point to in the purchase agreement to slow the closing, demand re-papering, or push for a price adjustment?” That is a different exercise.
- MAC / no-MAC condition
- Ordinary-course or interim operating covenant
- Bring-down of representations and warranties
- Specific closing conditions tied to consents, financing, or third-party deliverables
- Outside date and termination rights
Ordinary-course covenants create practical pressure fast
Sellers often assume they should simply keep running the business. The harder truth is that they usually can keep running the business only inside the box the agreement creates. Hiring decisions, bonus changes, customer settlements, pricing moves, capital expenditures, debt changes, vendor concessions, and unusual retention packages may all require consent, depending on the draft.
When the business is under stress, that box can become very tight. A founder facing a customer loss or key-employee departure may need to make a fast commercial decision that is perfectly rational for the company but inconsistent with the interim covenant if consent is not obtained.
Bring-downs and closing certificates are not clerical
At closing, the seller is often asked to confirm that the core reps and warranties remain true, subject to the standards negotiated in the agreement. That is where the officer’s certificate stops being boilerplate and starts becoming a pressure point.
If the disclosure picture has shifted since signing, the issue becomes whether the changes are permitted schedule updates, a breach that has crossed the closing threshold, or a matter that requires a formal amendment or waiver. Founders who treat disclosure schedules as a signing exercise rather than a live workstream usually feel this pain late.
Run the interim period like a project
The seller-side answer is process. Build a short list of items that cannot happen without legal review, keep a log of buyer consents requested and granted, and update the factual basis for key reps before the week of closing. This is particularly important where the buyer is also a competitor, the company is under financing pressure, or the deal relies on a heavy consent package.
That process should also align with the data-room rules and disclosure discipline described in Montague’s article on competitor-buyer NDA protections. The cleaner the interim record, the smaller the buyer’s opportunity to use uncertainty as leverage.
Copy/paste signing-to-closing risk checklist
SIGNING-TO-CLOSING RISK MAP 1. Core walk-away mechanics - MAC / MAE condition: - Bring-down condition: - Interim operating covenant: - Specific closing conditions: - Outside date / termination rights: 2. Decisions that should trigger internal review during the interim period - Executive hires, fires, retention packages, or comp changes - New debt, amended debt, covenant defaults, or waivers - Large customer concessions or unusual pricing moves - Settlements, threatened claims, or regulatory inquiries - Major vendor changes or supply interruptions - Capital expenditures outside budget - Changes to IP licenses, data practices, or security posture - Any event that could make a representation inaccurate 3. Weekly diligence-to-closing check - Are disclosure schedules still accurate? - Has anything happened that requires buyer consent? - Are all requested consents in the tracker? - Are material contracts still in force with no new defaults? - Are key personnel issues documented and addressed? - Are financial updates consistent with covenant limits? 4. Documents to refresh before closing - Officer’s certificate backup - Updated cap table - Contract-consent tracker - Litigation / claim memo - Key employment or retention changes - Financing-status memo - Governmental approval status 5. Negotiation questions if issues arise - Is the issue actually a MAC, or just a covenant / rep issue? - Does the agreement permit schedule updates? - What is the negotiated materiality standard at closing? - Can the issue be fixed with a targeted waiver instead of a repricing? - What facts should be disclosed immediately rather than carried silently?
