When negotiating the purchase or sale of a company, the investor or purchaser will often insist on what is known as a Material Adverse Change (MAC) clause.
This article deals with three issues related to the MAC clause: 1) what is it? 2) When should it be sought by an investor or granted by a seller? 3) What happens if it is exercised by the purchaser?

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Including a brief interview with Euro-Phoenix's CEO, Les Nemethy.

Everything has its risks, even getting out of bed in the morning. But that is no excuse for not getting out of bed at all: you can also have a heart attack under the duvet, after all.
 
The same is true for companies. No company is risk-free and business owners need to identify and fully understand the specific risks facing their companies. This is fundamental to good management, building corporate value, and to any due diligence process a business owner may have with investors.
 
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On the one hand, one might say that selling companies is the same anywhere in the world, and there is some truth to this: intellectually, the concepts are the same, the steps to the process are the same, and the reasons for transactions succeeding or failing have common elements all over the world. Having worked on transactions covering more than 40 countries, I can testify to these similarities.
 
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Almost every business owner dreams of hitting the jackpot by going public on a stock exchange. Yet when many find out what is involved in taking their company public, they recoil in horror, rapidly coming to the conclusion that this is not for them. But there are both pros and cons of going public for mid-sized businesses in Central Europe.
 
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A financial adviser, like a lawyer, may be an effective advocate of a client’s interests and provide valuable advice that can make the difference between success or failure of a transaction, or provide advice whose implications may be measured in many millions of euro.
 
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Mezzanine financing may be used both as a way of raising expansion capital for an enterprise or for financing the acquisition of an enterprise. As the name implies, in the financial mix of a firm, mezzanine financing is located between the "ground floor" of equity and the "first floor" of debt. Simply put, mezzanine finance is a way of raising capital using features of both debt and equity.
 
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One of the largest independent M&A firms in the region is growing rapidly, and Poland is its next destination:

Euro-Phoenix Financial Advisors Ltd has its sights set on Poland. The company, which first opened its doors in 2000 in Budapest, has been doing business across Central Europe for years. It has been active in the Polish market since 2001.
 
But until recently, it had not expanded its physical presence. Then, a year ago, it opened an office in Croatia, and in January this year it opened an office in Romania. Now the company – one of the largest independent M&A advisors in Central Europe – wants to open up a Warsaw office by the end of the year.
 
“M&A activity was curtailed somewhat in Poland in the past, because, due to an exuberant stock market, any CEO who did the math saw that he could get more for selling 49 percent of his company on the stock exchange than 100 percent to a strategic investor,” said Les Nemethy, the firm’s CEO and author of a syndicated column which appears on WBJ.pl. “Now the stock exchange pricing is more realistic; M&A is a real option.”
 
Mr Nemethy pointed out that Poland’s M&A market has begun to heat up, which added impetus to the decision to open up a Warsaw office. “I don’t think it’s possible for any business to have a Central European strategy without a presence in Poland,” he added.

Despite lacking an office there until this January, the company’s 2008 revenues from deals in Romania surpassed revenues from its home market of Hungary. Its Croatia office, after one year, has already doubled employment. The company has some 27 staff members located throughout Central Europe.
 
“In Poland we plan to start with two to three people, but that could grow quickly if we have similar success like we had in Croatia,” Mr Nemethy said.
 
The firm is looking for either an individual or partner company who will be “a force in the M&A community in its own right,” said Mr Nemethy. He also noted that Euro-Phoenix is “fully aware” that Poland is a complex and competitive market, with a number of quality boutique M&A firms that could pose strong competition.
 
When asked about his company’s advantages, Mr Nemethy cited his company’s regional network, which will help Polish companies in their regional expansion, and its independence. “Independence allows us to have a deal-driven entrepreneurial corporate culture, rather than being an economic or cultural appendage to a big institution.”
 
From Warsaw Business Journal by Andrew Kureth