Deal Protections and Remedies:

A Study of Public Merger Agreements in 2016

How have buyers and target companies responded to recent changes in Delaware law when negotiating public M&A deals?

Find out by reviewing the comprehensive Deal Protections and Remedies Study by Practical Law. The study examines the deal protections in 181 merger agreements for acquisitions of US reporting companies entered into in 2016 with an equity value at signing of $100 million or more.

This study analyzes the provisions that parties negotiate to balance a buyer's desire for deal certainty with a target board's need to remain flexible in order to satisfy its fiduciary duties. The study reviews trends in a host of deal-protection provisions, including no-shops and go-shops, fiduciary outs, matching rights, force-the-vote covenants, break-up fees, and more.

This year's edition of the study reviews the first full year of negotiated public merger deals since the Delaware Supreme Court's seminal 2015 decision in Corwin v. KKR, which held that an informed stockholder vote can restore the presumptions of the business judgment rule in the target board's favor. The study provides a timely snapshot of how practitioners have begun responding to the Delaware judiciary's increased deference toward director decision-making in M&A.

Deal Protections

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Uniquely among the existing literature and surveys of deal-protection provisions, this report also:

  • Examines how various deal characteristics—including buyer type, form of consideration and financing—influence the negotiations and ultimate agreement between the transaction parties.
  • Analyzes the deal protections negotiated by buyers who require their own stockholder approval before closing. By conducting this analysis, the study ascertains both how frequently buyers agree to symmetrical deal-protection measures and how reciprocally binding covenants and remedies affects the deal protections agreed to by the target company.
  • Reviews in detail the sizes of break-up fees across the study sample and compares them in cash versus stock deals, in stock deals where the buyer also pays a fiduciary break-up fee, and on the basis of deal size.

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Sample Excerpt: