DealLawyers.com Blog

With the FTC & DOJ taking an increasingly aggressive approach to merger review and enforcement, merger agreement terms allocating antitrust risk are becoming an ever more important part of the negotiation process.  This Cahill article reviews various antitrust risk-shifting terms that may be contained in merger agreements.

Some of these provisions, such as antitrust covenants, are targeted specifically at antitrust risk. Others, such as specific performance clauses, MAE clauses and termination and reverse termination fee arrangements, allocate a broader range of risk but also contain provisions that may implicate antitrust issues.  For example, here’s an excerpt from the article’s discussion of MAE clauses:

Both parties should consider whether the MAE has an impact on other clauses allocating general and antitrust risk. For example, hell or high water or best efforts antitrust covenants requiring a purchaser to undertake divestitures and other actions to obtain antitrust approval may be limited, purposefully or inadvertently, by an MAE provision.

Additionally, an MAE clause that provides that a substantive divestiture is an MAE could arguably undercut a hell or high water clause in the antitrust covenant. Parties should also consider the potential impact on antitrust risk provisions of taking a vague versus specific approach to defining an MAE.

– John Jenkins