May 16, 2016
Practical Law Releases Comprehensive Survey of M&A Breakup Remedies
EAGAN, Minn – Following a record year for mergers and acquisitions activity, Practical Law is releasing its most comprehensive survey ever examining the use of reverse break-up fees and other remedies for buyer breach in debt-financed M&A deals.
The seventh edition of the study, Reverse Break-Up Fees and Specific Performance: A Survey of Remedies for Financing and Antitrust Failure, includes statistical trends and full, deal-by-deal information on enforcement and damages remedies, reverse break-up fees, financing covenants, and other provisions for financing and antitrust failure. The study highlights both the most common practices and the most innovative approaches to allocating financing and antitrust risk in M&A deals.
This year's study sample provided a unique opportunity to observe how strategic buyers—operating companies making acquisitions for strategic rather than investment purposes—negotiate remedies for breach in debt-financed deals. On the heels of the strongest year for worldwide deal-making since Thomson Reuters began record-keeping, the study sample included 85 leveraged public M&A deals with an equity value of $100 million or more—the highest total available for review in the study's history. Of the 85 deals, 67 were reached with strategic buyers, also a record for the Practical Law study.
The survey found that target companies are increasingly succeeding at allocating the risk of financing failure to buyers, especially in deals with strategic buyers. In particular, the study found that a substantial majority of merger agreements gave target companies the right to enforce buyers’ obligations unconditionally, and more than ever before, merger agreements also held buyers accountable for unlimited damages in the event of a breach. For deals that include a reverse break-up fee payable by the buyer, the study found a median fee of exactly 6.00% of the deal's equity value, up slightly from the previous year.
“This study of remedies for financing and antitrust failure is an essential reference for M&A, finance and antitrust attorneys,” said Daniel Rubin, Senior Legal Editor, Practical Law at Thomson Reuters. “Reverse Break-Up Fees and Specific Performance: A Survey of Remedies for Financing and Antitrust Failure can help practitioners stay on top of market practice when negotiating risk-allocation measures in M&A deals and understand the strategies that drive those negotiations.”
The survey is available as a free eBook download at: www.practicallawdealstudy.com.
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