This Venable alert says SPACs have been back, especially since the “inflection point” in the second half of 2024, in which 57 SPAC IPOs raised approximately $9.6 billion. It says, “the renewed activity reflects increased investor confidence and a more orderly market environment.” That means that “SPAC market 2.0” differs from its predecessor in that it’s a little less wild wild west, to the extent you felt that way about the prior SPAC boom.
The SPAC market’s revival reflects broader improvements in both market conditions and the regulatory framework. Equity valuations have stabilized, traditional IPO windows have reopened, and the SEC Rules have provided long-awaited clarity on disclosures, liability, and sponsor compensation.
These developments have made SPACs more transparent, predictable, and investor friendly. Sponsors with strong track records are once again launching new vehicles, and institutional investors are returning. Recent transactions feature improved alignment between sponsors and investors and more disciplined deal structures.
Investors are focusing on experienced sponsors with credible track records and clearly defined strategies, while target companies are increasingly mature private companies seeking efficient access to public capital.
With enhanced regulatory certainty and a more measured approach to dealmaking, SPACs have reestablished themselves as a viable alternative to traditional IPOs for private companies seeking efficient access to public capital.
The Delaware Supreme Court recently issued its opinion in J&J’s appeal of the Chancery Court’s decision in Fortis Advisors v. Johnson & Johnson. J&J made numerous arguments on appeal, including that the Chancery Court misapplied the implied covenant and rewrote the parties’ bargain, misconstrued the “commercially reasonable efforts” clause and eliminated discretion that J&J should have had per the contract, erred in finding fraud, and failed to give effect to the exclusive remedy provision.
In Johnson & Johnson v. Fortis Advisors (Del.; 1/26), the Supreme Court agreed only with respect to the implied covenant, noting that the implied covenant applies to “developments that could not be anticipated, not developments that the parties simply failed to consider.”
Other provisions within the Merger Agreement acknowledged differing possible regulatory scenarios . . . Yet Auris and J&J chose to explicitly tie every regulatory milestone—totaling hundreds of millions of dollars—to “510(k) premarket notification,” and only to that pathway . . . We also conclude that the FDA’s regulatory switch from 510(k) to De Novo, although believed to be unlikely, was not unforeseeable at the time of contracting . . . Therefore, the implied covenant has no role to play here . . .
The implied covenant was the necessary premise of the Court of Chancery’s damages award for Milestone 1. Once 510(k) became unavailable for iPlatform’s first clearance, Milestone 1’s express condition could not be satisfied as written, and the damages award for Milestone 1 cannot stand.
J&J argued that the implied covenant decision had a “domino effect” and reversing that portion of the decision should relieve its obligations as to the remaining milestones. De Novo review is so much more onerous, it argued, that “’all the milestones, timelines, and payments”’ would have changed had De Novo been required to unlock 510(k).” The Court disagreed and found that the reversal of the implied covenant conclusion did not disturb Chancery’s rulings as to remaining milestones.
The remaining milestones are different. Those milestones continue—by their plain terms—to require 510(k) notifications. The Court of Chancery found, and J&J does not challenge, that once iPlatform obtained De Novo approval for a first generation indication, it could serve as its own predicate device and proceed through the 510(k) pathway for additional indications.
Accordingly, although the implied covenant did not require J&J to pursue De Novo approval in order to achieve Milestone 1, J&J remained obligated to use commercially reasonable efforts to pursue 510(k) approval for the remaining milestones, including by seeking De Novo approval for an initial indication where necessary to facilitate 510(k) clearance for subsequent indications. The unavailability of 510(k) for a general surgery indication did not excuse J&J from the later milestones. Reversing the implied covenant rewrite of Milestone 1 therefore does not disturb J&J’s express obligations, or the damages awarded, for the remaining regulatory milestones.
That means that the Court affirmed Chancery’s interpretation of the efforts clause and upheld the decision that J&J breached its express obligation to use “commercially reasonable, ‘priority’ device efforts” to achieve the remaining regulatory milestones — maintaining Chancery’s damages methodology, which had resulted in damages with interest exceeding $1 billion — except for damages awarded for Milestone 1. The Court remanded the case so that damages calculation can be redone to exclude the Milestone 1 payment.
It was long enough ago that I can’t remember exactly when I started hearing about the machine learning tools being developed to improve contract due diligence. Now those tools are commonplace. But how else are M&A attorneys leveraging GenAI to improve M&A workflows? This Sullivan & Cromwell article discusses some of the ways:
Research
Market Research. AI tools can be used to research industry and market trends, as well as the target company’s business, challenges, and publicly reported events.
Legal Research. Standalone AI products or AI features built into existing online legal research tools can help expedite legal research. For example, GenAI-powered legal research tools allow lawyers to ask questions in a conversational style and receive summarized answers with citations to case law and secondary sources.
Due Diligence
Defensive Profiles. GenAI tools can be used to analyze a target company’s public filings and produce a corporate profile, including a description of the target’s capital structure, board and management teams, and takeover defense measures.
Contract Identification and Risk Analysis. GenAI technology can be leveraged to identify and extract specific terms (e.g., change-of-control provisions) from an agreement. Attorneys may query GenAI tools to identify specific agreements, or agreements presenting a particular risk, in a VDR.
Summarization of Diligence Materials. AI tools can also be used to generate summaries of documents, or to assist with drafting diligence deliverables.
Drafting & Negotiation
Drafting Assistance. GenAI tools can assist with preparing initial drafts of agreements and related transaction documents based on standard forms, precedents, and other data sources. They may also be directed to propose thematic changes (e.g., “make the purchase agreement more buyer-favorable”).
Issues List Generation. GenAI technology can be used to prepare initial drafts of issues lists based on drafts or markups received from the counterparty to guide attorney review and negotiation.
Market-Standard Benchmarking. AI can be used to support negotiation strategy by identifying market-standard positions and comparing the relevant transaction documents or provisions to the benchmark deal terms.
Execution
Deal-Process Optimization. AI tools can be used to summarize communications, flag open points, track action items, assist with inbox management, and other procedural tasks.
Signing and Closing Automation. AI tools can generate signing and closing checklists tailored to the deal structure and timing. They can also assist with execution logistics, including signature page management and closing binder preparation.
This all sounds great, but many risks remain. The alert describes some risks specific to M&A related AI applications, such as a bias in favor of publicly filed transactions.
As we await a SCOTUS ruling on the legality of the Trump Administration’s tariffs, dealmakers are stuck (again) navigating tariff uncertainty. This Greenberg Traurig alert says:
If SCOTUS strikes down the IEEPA-based tariffs, the implications may be significant: an aggregate amount in excess of $150 billion in tariff proceeds may become refundable to importers. Given the scale of the tariffs collected to date, such a ruling may represent one of the largest refund events tied to trade policy in modern U.S. history and might raise complex questions around entitlement, timing, and mechanics of recovery.
That means you should at least consider whether to address the entitlement to potential refunds from pre-closing periods when structuring and negotiating deals.
M&A parties, particularly in equity transactions, should consider proactively addressing which party is entitled to any tariff refunds arising from periods prior to closing. On the sell-side, where a portfolio company has borne IEEPA-based tariffs, sellers should consider ensuring that the buyer’s obligations under the post-closing tax covenants clearly preserve the seller’s entitlement to such refunds. For certain importers, the potential refund of IEEPA-based tariffs may represent substantial value, beyond the range of typical pre-closing tax refunds, making silence or ambiguity in the purchase agreement a potential economic risk.
If the parties’ intent is that the seller retains the benefit of these refunds, the parties may wish to make explicit reference to tariff-related refunds in the relevant defined terms and operative provisions, thereby eliminating uncertainty around post-closing property rights. Conversely, on the buy-side, particularly in competitive auction processes, it may be prudent for buyers to instruct tax accountants and other advisors, early in the due diligence process, to estimate the potential magnitude of any refunds. Armed with that analysis, a buyer can decide whether to make that value legible in its bid as part of overall value delivery to the seller or, alternatively, to reserve it as a negotiating lever later in the process, including as a potential source of set-off against an aggressive headline price or known, material diligence issues that fall outside the scope of representation and warranty insurance coverage.
We may be seeing some interesting tariff-refund-related post-closing disputes in our future! In the meantime, we’ve also seen a number of articles about how to preserve your right to a refund.
In Brancous, LP1 v. Braemar Hotels & Resorts, (D. Md.; 12/25), a Maryland federal court issued an oral ruling denying a plaintiff’s motion to preliminarily enjoin an annual meeting of shareholders. In doing so, the Court concluded the plaintiff was unlikely to succeed on the merits of its claims challenging the application of the company’s advance notice bylaw and alleging that the company failed to comply with its obligations under Exchange Act Rule 14a-19 by refusing to list the plaintiff’s nominees on its proxy card.
A key factor in this decision was the plaintiff’s delay in asserting its claims. The plaintiff did not submit its nominations until four months after the deadline specified in the company’s advance notice bylaw, did not file its lawsuit until a month after its nominations had been rejected, and did not seek a preliminary injunction until 10 days before the date scheduled for the meeting. None of those facts escaped the attention of the Company – or the Court.
Nevertheless, the plaintiff alleged that the company improperly manipulated its advance notice bylaw provisions by refusing to accept its nominations. It pointed to the company’s decision to postpone its annual meeting without adjusting the notice deadline set forth in the advance notice bylaw. The Company argued that the nomination deadline was clearly specified in the bylaw, and that it also stated that postponing or rescheduling the meeting would not reopen the nomination window.
Pointing to SEC guidance that Rule 14a-19 did not require a company to include a shareholder’s nominees on its proxy card where a company determines that the shareholder did not comply with advance notice bylaw requirements, the Company also argued that its refusal to include plaintiff’s nominees on its proxy card did not violate the universal proxy rule.
The Court concluded that the Company had the better of these arguments and denied the plaintiff’s motion for a preliminary injunction. It also concluded that the plaintiff’s dilatory approach to the lawsuit was independently fatal to its claims. This White & Case memo on the decision highlights the following key takeaways:
– For activists, the decision reinforces the need to comply with both company bylaws and SEC proxy rules. The court supported the SEC’s guidance that Rule 14a-19’s universal proxy requirements only apply in a contested election—meaning the activist must actually file a proxy statement and solicit proxies. In this case, Brancous did not do so, and that failure was fatal to its claims. Without a contested election, the company was not required to include Brancous’s nominees on its proxy card or treat the situation as a proxy contest.
– The ruling also highlights the importance of acting promptly. Activists who delay challenging a nomination rejection or seeking court relief are unlikely to succeed, as courts are reluctant to grant emergency relief when the activist’s own delay created the urgency. At the same time, companies should not wait until the last minute to notify shareholders of deficiencies in their nomination notices. Prompt communication is essential to avoid claims of unfairness or gamesmanship.
Another thing that makes this case interesting is that, as White & Case points out in its memo, this is the first time that a federal court has addressed the application of Rule 14a-19 in the context of a rejected nomination.
It’s no secret that PE funds have been compelled to hang on to their investments in portfolio companies for longer periods of time in recent years, but an FTI Consulting article from last summer suggests that exits are likely to be even tougher to come by over the next few years:
[T]he exit transaction stalemate likely will worsen over the next couple of years, as the investment vintage years of 2021-2022 represent a high watermark for the number of U.S. buyout deals done and transaction multiples paid — even higher than multiples paid in 2017-2019 per PitchBook —which is attributable to a ZIRP monetary policy that propelled valuations at the time but is now long gone.
As the investment year buyout cohort of 2021-2022 approaches its five-year holding period, sponsors will be forced to reckon with market valuation multiples that in many instances are appreciably lower than those they bought-in at while potential buyers contend with borrowing rates that are materially higher than rates in the pre-QT period. Sponsors will need to assess this deal environment and decide what actions are most sensible relative to their investors’ expectations.
FTI says that this means it’s likely that funds’ average holding periods for their portfolio company investments will continue to trend longer as these 2021-22 transactions mature and “the harsh reality of lower exit multiples becomes more evident to sponsors.”
PwC’s US Deals 2026 Outlook notes that middle market activity was “underwhelming” in 2025, and cites the sector’s vulnerability to tariff shocks and enhanced immigration enforcement as key factors that created additional uncertainty for middle market companies during 2025. While less volatility in these areas and a more favorable interest rate environment may help improve the middle market climate in 2026, PwC says a lot depends on what PE firms do. Here’s an excerpt:
The potential middle-market swing factor for 2026 is the role of private equity buyouts and exits. PE firms now hold more dry powder and older portcos than during prior large-deal cycles, which could drive additional volume if financing conditions remain favorable.
But valuation gaps are still making it harder for funds to exit and provide returns to limited partners—in turn putting pressure on fundraising. While many funds have capital to invest, they remain cautious. We also believe that shifts in PE buyer behavior, including the use of platform roll-up strategies, help explain some of the decline in middle-market deals.
PwC says that competition for quality middle-market assets is likely to pick up, with more large funds turning to the middle market to find opportunities. It suggests that smaller funds will likely need to focus on specific sectors or subsectors to remain competitive, and may seek to differentiate themselves by bringing in operating partners to help strengthen their portfolio companies.
The ABA recently announced the publication of its 2025 Private Target Deal Points Study. The Study was last updated in 2023, and this excerpt from the ABA’s announcement highlights some of the changes in market practice observed since then:
– Earnouts: Earnouts became less prevalent and displayed some buyer-friendly features. Use of earnouts decreased from 26% during the period covered by the 2023 Study to 18% during the period covered by the 2025 Study. Earnouts are often used to address valuation gaps, and this data point suggests that valuation gaps narrowed somewhat during the period covered by the 2025 Study.
– RWI: The use of representations and warranties insurance (RWI) increased compared to the prior Study. 63% of deals during the period covered by the 2025 Study referenced RWI (our proxy for whether a transaction utilized RWI) as compared to 55% of the deals during the period covered by the 2023 Study.
– No Survival Deals: Deals that provide that representations and warranties do not survive closing increased from 30% in the prior Study to 41% in this Study. This increase is likely related to the increase in RWI deals.
– Indemnification for “Actual” vs. “Alleged” Breaches: Indemnity coverage for alleged breaches increased from 17% from to 27% in this year’s Study; this appears to also be driven by an increase in RWI deals.
– Single vs. Double Materiality Scrape: The use of double materiality scrapes increased from 69% to 82% in the prior study. Again, this increase appears to be related to the increase in the use of RWI.
This edition of the Study added several new data points, including how often transaction expenses are included in post-closing purchase price adjustments, how often deals that include the definition of “Material Adverse Effect” specify that a fact or condition existing at the time of signing the acquisition agreement could constitute an MAE, how often the failure/inability to adequately defend a claim could result in a loss of the indemnifying party’s right to control defense, and how often fraud is included in purchase agreements as a standalone indemnity.
The 2025 Private Target Deal Points Study is available for download without charge by members of the ABA’s Mergers & Acquisitions Committee (which members of the ABA Business Law Section can join without additional charge).
Several states have recently enacted extended producer responsibility (EPR) statutes making manufacturers responsible for the entire lifecycle of their products, most notably with regard to end-of-life management issues like recycling and disposal. This DLA Piper blog reviews the key due diligence issues raised by these EPR laws and points out that they raise significant valuation, pricing, and integration issues, particularly in packaging intensive sectors. Here’s an excerpt from the blog’s discussion of where parties should consider addressing EPR concerns in their deal terms:
– Representations and warranties. Specify representations on producer status under each state regime, PRO registration and membership, completeness and accuracy of material volume reporting, timely payment of dues, absence of notices or penalties, and compliance with labeling and recyclability standards. These include provisions that 1) require the representations to be re confirmed at closing (i.e., bring downs), 2) apply “knowledge” qualifiers where appropriate, and 3) measure materiality against a defined “Material Adverse Effect” – all specifically for EPR matters.
– Covenants. Address 1) pre-close registration and reporting, where required; 2) maintenance of data systems and controls; 3) cooperation for audits and historical substantiation; and 4) interim restrictions on packaging and material changes that could alter dues. Establish post close remediation plans with milestones for redesign and PRO compliance.
– Pricing mechanics. Address working capital treatment for accrued or unbilled dues, targeted purchase price adjustments for known schedules and assessments, and earn-outs linked to redesign milestones or eco modulation credits. Size short tail escrows to audit or reassessment cycles.
The blog also suggests using specific indemnities to address pre-closing liabilities with separate baskets, caps and survival provisions aligned to statutory lookbacks and producer responsibility organization audit windows. It says that parties should also address producer status issues in co-packer, private label and license agreements if a counterparty’s non-compliance threatens market access, and establish termination and price adjustment provisions triggered when verified EPR costs exceed agreed caps at various milestone points during the transaction.
The Fried Frank team recently released an activism outlook for 2026. Here’s what they’re predicting based on 2025 trends:
– M&A-Focused Campaigns on the Rise
– Emerging Activists Targeting Smaller Companies
– Private Settlements Over Public Proxy Fights
– Retail Investor Engagement Takes Center Stage
– Potential Changes to Quarterly Reporting Requirements
The first four are continuations of existing trends, but the last one of course is new. If the move away from quarterly reporting pushes forward, the Fried Frank team expects “activists may push companies to maintain quarterly reporting or otherwise report more frequently than semi-annually.” The alert suggests, “Even before any rule is adopted, boards should consider their position on this issue and be prepared to articulate their rationale.”
Programming Note: We’re starting our holiday blogging schedule tomorrow, which means that, absent some earth-shattering developments, this blog won’t be back until after January 1, 2026. Happy holidays, and best wishes to all of our readers for the new year!