April 6, 2022

Ukraine Crisis: M&A Agreements’ Sanctions Language Gets an Update

Language addressing compliance with U.S. trade restrictions & other sanctions is a common feature of reps & warranties in acquisition agreements.  Well, Bloomberg Law’s Grace Maral Burnett says that language is getting an update as a result of the Ukraine crisis. Here’s an excerpt from her analysis on how merger agreements have changed the language of these provisions over the past month:

Russian President Vladimir Putin’s recognition of the Donetsk and Luhansk republics on Feb. 21 resulted in an immediate White House executive order prohibiting transactions with those and certain other occupied regions of Ukraine, and a Feb. 22 Treasury Department declaration of sanctions on Russian banks and Kremlin-connected elites and restrictions on Russian sovereign debt.

These actions are significant parts of the Ukraine-related sanctions that have been a centerpiece of the U.S. response to the Russian invasion that began on Feb. 24. The crisis that they addressed is likely to further increase in importance, with Russian forces refocusing their efforts on the Donbas region, where Donetsk and Luhansk are major cities.

Based on an advanced Bloomberg Law transactional precedent search, eight publicly filed M&A agreements that contain references to the Donetsk and Luhansk regions in otherwise typical sanctions-related provisions have been executed by deal parties between Feb. 27 and March 29.

The majority of these deals are large—valued at above $1 billion dollars—and most were advised by the some of the top-ranked M&A law firms as deal counsel. The largest deal among them is the currently pending $10.7 billion Thoma Bravo acquisition of Anaplan Inc.

In these agreements, references to the Donetsk and Luhansk regions of Ukraine have been added to defined terms such as “Sanctioned Person,” “Sanctioned Country,” and “Sanctioned Jurisdiction,” which are in turn referenced in representations and warranties pertaining to sanctions.

The analysis also includes some samples of specific language addressing the Donetsk & Luhansk regions, and also discusses agreements in which “Russia” is specifically mentioned in the agreement’s definition of a “Sanctioned Person” or “Sanctioned Country.”

John Jenkins