Finance. A term of art used as a threshold to measure the effect of some event. The language may vary slightly, but a typical definition is:

"a material adverse change in the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise), or prospects of the Borrower, individually, or the Borrower and its Subsidiaries taken as a whole."

Used primarily as a condition precedent to funding in commitment letters and loan agreements and may also constitute an event of default under the loan agreement. Often used interchangeably with the term "material adverse effect" although the definition of material adverse effect should be used when qualifying representations and warranties, covenants, and other terms of the loan documents since it is more extensive. See also material adverse effect.

Mergers and acquisitions. A term of art used as a materiality threshold to measure the negative effect of some change or event on the target business. A material adverse change is typically considered to be an extremely high threshold and the definition in the acquisition agreement often carves out certain widespread events (such as terrorism). The scope of the definition (and its exceptions) depends on the type of transaction, industry and negotiating power amongst the parties. A material adverse change is sometimes used to qualify the representations and warranties (particularly in a public merger). For example, a representation and warranty relating to governmental consents can be qualified to say, "the company has made all governmental filings except those that the failure to make are not reasonably likely to result in a material adverse change." Typically, acquisition agreements also contain a condition to closing allowing a party to refuse to complete the deal if the other has suffered a material adverse change between the signing of the agreement and the closing of the acquisition. Material adverse change is often used interchangeably with material adverse effect. For more information on material adverse change provisions, see Practice Note, Material Adverse Change Provisions: Mergers and Acquisitions.