The latest Weil Private Equity Sponsor Sync focuses on take-private transactions. One article includes year-to-date comparisons of key deal terms from sponsor-backed take-private deals announced in 2024 to those announced in 2025 (through May 2025). Here are some differences they identified in deal terms across the two time periods that may indicate where market dynamics are evolving.
Club deals accounted for 29% of sponsor-backed take privates in 2024, reflecting a willingness among sponsors to partner on large transactions and driven in part by the resurgence of the so-called “mega deals” (deals of at least $1 billion). By contrast, we have only observed one club deal so far in 2025, suggesting a possible shift toward single-sponsor funded transactions (and perhaps smaller transactions), though the trend may normalize as the year progresses.
In 2024, the “specific performance lite” construct (allowing the target to compel sponsor’s equity financing only if buyer’s debt financing is available) reemerged as the preferred market remedy to address an acquirer’s financing failure and a target’s closing risk in sponsor-backed going private transactions, due in part to the increase in debt-financed transactions. Among 2024 deals, 28% provided for full specific performance (whereby the target can force a closing upon satisfaction or waiver of the applicable closing conditions, regardless of whether an acquirer’s debt financing is available) while 71% contemplated specific performance lite . . . the prevalence of specific performance lite over full specific performance has continued in 2025 – with 11% of deals contemplating full specific performance and 78% using specific performance lite. This seems to indicate a continued, and perhaps growing, ability of sponsors to limit financing risk.
The average reverse termination fee (“RTF”) as a percentage of enterprise value and equity value in 2024 was 5.1% and 7.1%, respectively. For 2025 deals, those averages significantly declined to 4.3% and 6.5%, respectively. The mean RTF of 4.3% of target enterprise value is much lower than expected, and moreover, much lower than the mean amounts observed over the past few years (since 2018, the mean RTF as a percentage of enterprise value has been between 5 and 6% except in 2021 where it exceeded 6%). While these changes may normalize as the year progresses, they may reflect slightly more sponsor-favorable risk allocations or changes in deal leverage.
Go-shop provisions appeared in 20% of 2024 deals and 22% of 2025 deals. The negligible increase suggests continued selectivity in their use, which is typically tied to the target’s process . . . the use of go-shop provisions in take private transactions generally fluctuates over time due to the fact specific nature of whether a target company’s board feels compelled to include a go-shop provision, which is often driven by the extent to which the company has engaged in a pre-signing market check.
I think most lawyers are well-acquainted with the potential perils of a letter of intent, term sheet or other preliminary transaction document being regarded as binding in one or more respects. However, what’s probably not on most people’s radar screens – or at least not on mine – is the possibility that such a document may have an “afterlife” such that it is binding even after the parties have executed a definitive acquisition agreement. However, this Mayer Brown memo says that in some cases, term sheets and similar documents may in fact have that result:
In most cases, a term sheet serves a limited purpose and is replaced by a definitive agreement (or set of agreements) that incorporates the full set of deal terms. With a definitive agreement in place, parties may believe that the binding provisions of the term sheet are no longer in force. However, under Delaware Law, a definitive agreement does not supersede the binding provisions of a term sheet unless one of the following is true:
– The provisions of the definitive agreement contradict the binding provisions of the term sheet, in which case the term sheet will be superseded only to the extent of those contradictions.
– The parties expressly agree that the term sheet is no longer binding. Often, a definitive agreement will accomplish this by including an integration clause (sometimes referred to as a “merger” or “entire agreement” clause). A standard integration clause states that the definitive agreement supersedes all other agreements between the parties with respect to its subject matter. An integration clause creates a presumption that there are no additional terms outside of the agreement (including a term sheet) that will change the terms of the agreement.
However, like any other contractual provision, integration clauses are interpreted according to their plain meaning, and the presumption of integration may be rebutted with evidence (including contractual terms and the parties’ course of dealing) that show an intention for the term sheet to remain in force alongside the definitive agreement
The memo reviews several Delaware decisions in which obligations imposed by term sheets have survived the execution of a definitive agreement and identifies several factors which may contribute to a conclusion that those provisions survive.
These include situations where the purpose or subject matter of the term sheet differ from those of the definitive agreement, where the term sheet includes provisions not addressed in the definitive agreement, and where the parties to the term sheet differ from the parties to the definitive agreement. The memo also points out the role that the parties’ course of dealing may play in a court deciding that the term sheet survives the signing of the definitive agreement.
Earlier this week, in Wong Leung Revocable Trust v. Amazon.com, (Del. 7/25), the Delaware Supreme Court overruled a prior Chancery Court decision dismissing a stockholder’s Section 220 action against Amazon. This excerpt from a recent Business Law Prof Blog post on the case summarizes the Court’s decision:
A stockholder sent a letter to Amazon, demanding to inspect books and records under Delaware’s Section 220. The stockholder’s stated purpose was to investigate Amazon’s possible wrongdoing and mismanagement by engaging in anticompetitive activities.
The request kicked of an extended legal battle. A Magistrate conducted a one-day trial that led to a report siding with Amazon that the the stockholder had not alleged a “credible basis” to infer possible wrongdoing by Amazon. The stockholder took exception. A Vice Chancellor also sided with Amazon, but on a different basis–finding that the stockholder’s purposes was overbroad, “facially improper,” and not lucid. The stockholder appealed and the Delaware Supreme Court reversed.
Under Delaware law, investigating corporate wrongdoing is a legitimate purpose, but stockholders must present “some evidence to suggest a credible basis from which a court can infer that mismanagement, waste or wrongdoing may have occurred.” The Supreme Court found that the Vice Chancellor had erred in its interpretation of the scope of the stockholder’s purpose and should have engaged “with the evidence presented by the [stockholder].”
On the evidentiary front, the stockholder pointed to a history of investigations, lawsuits, fines, and one Federal Trade Commission action against Amazon that survived a motion to dismiss. The Delaware Supreme Court stressed that the credible basis standard is the “lowest possible burden of proof under Delaware law.” It requires more than a “mere untested allegation of wrongdoing but does not require that the underlying litigation result in a full victory on the merits against the company.” Collectively, these predicates sufficed to “establish a credible basis from which a court can infer that Amazon has engaged in possible wrongdoing through its purported anticompetitive activities.” Now the matter heads back to Chancery to “determine the scope and conditions of production.”
The blog points out that if Amazon was incorporated in Nevada, this case would’ve turned out differently. In fact, my guess is that the lawsuit never would’ve been filed in the first place. That’s because under Nevada’s statute (which I think we all may need to start getting more familiar with), stockholders in a public company don’t have inspection rights.
With the IPO market’s extended slump, private market liquidity alternatives have continued to grow in importance. Gunderson Dettmer recently published a report on market trends in one of the most prominent of those liquidity alternatives, private company tender offers. The report was based on data garnered from over 250 private tenders in which the firm was involved. Topics addressed include company valuation, deal size, pricing, the nature of the buyers, the securities invovled, and the sellers eligible to participate in the offer.
Eligible sellers in a tender offer might include founders, insiders, current service providers, former service providers, and investors. This excerpt discusses how frequently each of these groups was eligible to participate in a tender offer:
The data on eligible sellers shows the percentage of deals over the past 18 months in which each of the named groups was allowed to participate and sell shares. The group most often included is current service providers, who were eligible to sell shares in 87% of the deals. Note however that, for each of the named groups, companies will often limit participation to only a defined portion of the group.
For example, investors could be limited to holders of a certain series of preferred stock, or former service providers could be limited to individuals whose employment was terminated in a reduction in force. For service providers, companies often limit participation based on years of employment. In 39% of deals in the past 18 months, current and/ or former service providers had to meet a years-of-service requirement (typically between 1 and 3 years) to be eligible to participate in the offer.
The figure showing that founders were eligible to participate in 78% of deals reflects both deals in which founders could tender shares in the tender offer, and deals in which the parties negotiated to allow insiders to sell shares prior to or following the tender offer. Founders sold shares in these “outside” transactions in 27% of tender offer deals over the past 18 months, while founders were eligible to participate in the defined tender offers in 51% of the deals.
The report also addressed the percentage of their holdings that each group was allowed to sell in the tender offers in which they were eligible to participate. It concluded that founders, insiders and current service providers were limited to tendering 20% of their holdings, former service providers were limited to tendering 28% of their holdings, and investors were not subject to a limit on tenders.
A recent FTI Consulting article provides advice to sellers on strategies to ensure that the TSA they enter into in connection with a divestiture facilitates seamless transaction and protects their financial and operational interests. This excerpt discusses how sellers can manage financial exposure and limit operational burdens in the process of determining the services buyers may require and the ones sellers are willing to provide:
– Assess Contractual and Operational Feasibility: Review vendor contracts to confirm which services can be legally provided under the TSA. For example, payroll providers, real estate subleases and systems like enterprise resource planning (“ERP”) often require third-party consents, which may incur fees. Identify operationally complex or costly services, such as benefits administration or treasury, and consider excluding them to streamline delivery.
– Exclude Strategic or Sensitive Functions: Avoid providing services related to post-closing strategy, such as financial planning, sales forecasting or marketing. These functions can expose proprietary knowledge and entangle sellers in long-term decisions. Maintain a focus on operational support to reinforce boundaries and avoid exposure to strategic or commercial risk.
– Understand the Buyer Type: Tailor the TSA based on whether the buyer is strategic (likely to integrate the target) or financial (likely to operate it independently). Strategic buyers may require a narrower scope and shorter duration. Financial buyers, such as private equity sponsors, often require broader services and longer timelines to support the stand-up of a new platform.
– Mitigate Stranded Costs Proactively: Stranded costs, such as underutilized staff, systems or facilities, can erode margins following a divestiture. Enable buyers to exit specific functions in a phased manner to reduce delivery complexity and protect the seller’s cost base. Evaluate changes to scope and duration through a lens of cost recovery.
Other topics addressed in the article include pricing provisions, transparency and governance arrangements, IP and data security, the need for robust exit mechanisms, the need for clearly defined performance metrics and accountability, and the need to build in mechanisms for managing change and fairly allocating risks.
We’ve recently posted another episode of our “Understanding Activism with John & J.T.” podcast. This time, J.T. Ho and I were joined by Evercore’s Gloria Lin. We spoke with Gloria on a range of topics relating to the current activism environment. Topics covered during this 34-minute podcast include:
– Current activism environment and key campaign themes
– Evolving activist tactics
– Timing and number of activist settlements
– Director characteristics being targeted by activists
– Key lessons that you have learned from recent proxy fights
– Influence of macroeconomic conditions on recent activist campaigns
– Potential impact of recent events in the Middle East on activism trends
– Tips for vulnerable companies on how to prepare for activism today
This podcast series is intended to share perspectives on key issues and developments in shareholder activism from representatives of both public companies and activists. We continue to record new podcasts, and they’re full of practical and engaging insights from true experts – so stay tuned!
Last February, on TheCorporateCounsel.net, I blogged about the decision by California’s Fourth District Court of Appeal in EPICENTERx, Inc. v. Superior Court (Cal. Ct. Appeal, 9/23), which refused to enforce a forum selection clause “in a Delaware corporation’s corporate documents” since it “would operate as an implied waiver of the plaintiff’s right to a jury trial—a constitutionally-protected right that cannot be waived by contract prior to the commencement of a dispute.” California was an outlier — with Georgia; while most state constitutions recognize the right to a jury trial, California and Georgia courts had expressly prohibited pre-dispute jury waivers.
This decision effectively overrules Handoush v. Lease Financing Group, LLC, 41 Cal.App.5th 729 (2019), in which the California Court of Appeal (First District) restricted courts from enforcing such clauses where the plaintiff would not be entitled to a jury trial in the selected forum. The Supreme Court’s decision thus clarifies the law in California, providing practitioners and litigants with greater certainty that forum selection clauses will be enforced . . .
The Supreme Court explained that although California does recognize a fundamental public policy interest in preserving the right to a civil jury trial and pre-dispute jury waivers are invalid, this policy is tethered to jury trials in California courts. The policy does not conclusively forbid waivers outside California courts. Nor does it preclude contracting parties from agreeing to resolve disputes in fora outside California, even when those fora recognize much more limited (or no) jury trial rights. The Court recognized the importance of enforcing forum selection clauses, citing federal authority from United States Supreme Court and the United States Court of Appeals for the Ninth Circuit.
The California Supreme Court reversed with instructions for the Superior Court to consider the plaintiff’s other arguments for non-enforcement of the forum selection clause, namely that they were improperly adopted and not “freely and voluntarily negotiated at arm’s length.” The Court declined to address the merits of these other theories because they were not considered or decided by the Court of Appeal. Although the Court held that the loss of jury trial rights could not alone justify non-enforcement of a forum selection clause, it left open the possibility that jury trial rights might be relevant to related public policy arguments for non-enforcement.
EpicentRx is an important decision for practitioners in California. It dispels the confusion created by Handoush, and thus provides much greater certainty to California-based corporations that California courts will enforce forum selection clauses — often selecting the Delaware Court of Chancery, but also increasingly selecting business courts being established in Texas, Nevada and other jurisdictions — for resolution of complex corporate and business disputes.
In Hartfield, Titus & Donnelley, LLC v. MarketAxess Holdings, Inc., (Del. Ch.; 7/25), seller sought to reform a membership interest purchase agreement to reduce the minimum threshold that would allow it to pay cash to “top-up” to the maximum earnout target. It argued that re-writing the contract was appropriate under the doctrine of mutual or unilateral mistake because the parties had previously agreed to prorate the earnout target itself to reflect the transaction’s mid-month closing date. Yesterday, the Chancery Court denied the seller’s request because it failed to show a meeting of the minds that the cash top-up threshold would be similarly prorated. Here’s more background:
In September 2020, MarketAxess Holdings entered into a membership interest purchase agreement to acquire HTD’s municipal bonds trading platform. The purchase price included an up-front cash payment and multiple potential earnout payments. HTD could receive an earnout by achieving targets measured by the amount of annual system license fees HTD paid MKTX to use the acquired platform during the earnout period, with a maximum earnout target of $3,250,000 in system license fees. But, if the system license fees paid by HTD were between $2,750,000 and $3,250,000, it could pay an amount in cash to “top-up” to the maximum $3,250,000 earnout target.
When the closing date was set for April 9, the parties sought a way to address a mid-month closing in the earnout calculation and settled on adjusting the earnout table to prorate the target figures (356/365ths of what was negotiated). “The parties did not think to similarly prorate the minimum threshold triggering HTD’s ability to pay cash to “top up” to the maximum prorated earnout target.” When the actual license fees at the end of the first earnout period were short of the agreed-upon cash top-up threshold but above a prorated amount — and the parties failed to reach an agreement on a new earnout structure — litigation ensued over whether the failure to adjust the “top up” minimum was a “mistake.”
In a memorandum opinion issued after a four-day trial, Vice Chancellor David found that HTD failed to prove either mutual or unilateral mistake.
‘Regardless of which doctrine is used, the plaintiff must show by clear and convincing evidence that the parties came to a specific prior understanding that differed materially from the written agreement’ . . . In this action, HTD has failed to meet its burden to prove by clear and convincing evidence that the parties reached a prior understanding to prorate the Cash Top-Up Threshold . . .
HTD argues that when the parties negotiated the Amendment, they “reached a specific prior understanding to ministerially prorate all targets to account for a shortened initial earnout calculation period[,]” which, according to HTD, included the Cash Top-Up Threshold.
But the record evidence shows that the parties never discussed whether, let alone agreed that, the Amendment would prorate the Cash Top-Up Threshold. Both parties point to a March 29, 2021 email . . . proposing three alternatives to address the effect of a mid-month closing on the earnout calculation. HTD accepted MKTX’s proposal to “adjust the table so that the system license fee target figures are 356/365ths of the figures expressed in the table” but did not mention prorating the Cash Top-Up Threshold . . .
There could be “no meeting of the minds about how the [Cash Top-Up Threshold] would operate” with the prorated system license fee targets because the parties never discussed the issue. Only after the First Earnout Calculation Period was nearly over did HTD assert that the Cash Top-Up Threshold should have been prorated, but HTD reached that view months after the parties executed the Amendment, and it therefore does not support a specific prior understanding at the time the Amendment was signed.
This HLS Blog post from Wachtell succinctly summarizes some of the key provisions of the One Big Beautiful Bill Act that will impact domestic and cross-border M&A.
On the domestic front, the OBBBA makes permanent several taxpayer-favorable TCJA provisions.
– Taxpayers will again be entitled to deduct immediately 100% of the cost of depreciable tangible assets, likely increasing the appeal of acquiring assets as compared to stock.
– The deduction for up to 20% of the business income of certain noncorporate investors in certain pass-through entities is made permanent, preserving the tax efficiency of partnership, rather than corporate, joint venture structures for those investors.
– The OBBBA permanently restores the pre-2022 TCJA limitation on interest expense deductions by applying the 30% limit to an amount that approximates EBITDA, rather than EBIT. But it imposes new limits by excluding from the EBITDA calculation certain foreign-source items of income. The net impact of these changes on particular leveraged transactions will need to be assessed.
For U.S. multinationals, the OBBBA is a mixed blessing.
– It widens the scope of income of U.S.-parented “controlled foreign corporations” (“CFCs”) that is subject to current federal income taxation, but generally improves the U.S. parent company’s ability to credit foreign income taxes. Specifically, GILTI (the TCJA’s tax on CFC earnings in excess of a deemed 10% return on tangible assets) is replaced with a more costly tax on “net CFC tested income,” a concept that does not reflect a deduction for the return on tangible assets.
– However, the OBBBA liberalizes the foreign tax credit regime by increasing the amount of foreign taxes that may be credited against net CFC tested income and by no longer requiring interest expense and research and experimental expenditures to be allocated against such income.
– The OBBBA also revises the treatment of mid-year sales of CFCs, requiring a pro rata income allocation based on the period of stock ownership.
It urges M&A participants to understand the new law (many provisions of which are effective for tax years beginning after December 31, 2025) and take it into account when negotiating pricing, transaction structure and deal terms.
On Friday, Chancellor McCormick dismissed all claims against Elon Musk and X Corp. in Khalid v. Musk (Del. Ch.; 7/25). Plaintiff, a retail investor, first purchased Twitter stock after Musk said he entered an agreement to acquire the company at $54.20 per share and then sold those shares after Musk said he was terminating the merger agreement. He incurred losses to the tune of $1.88 million and sued, asserting eleven tort, fiduciary, and contractual claims. Defendants moved to dismiss based on lack of personal jurisdiction (Musk) and failure to state a claim (X defendants).
With respect to Musk’s motion to dismiss, the opinion addresses the plaintiff’s argument that Musk transacted business in Delaware by entering into the merger agreement and consented to jurisdiction under its forum selection clause. It notes that “an express consent to jurisdiction satisfies the requirements of due process and typically resolves the statutory analysis,” but a consent to jurisdiction only applies to claims under that agreement, and, with respect to those claims, plaintiff must show he was an intended third-party beneficiary — since he was not a party to the merger agreement. The court dismissed all the contractual claims, applying the reasoning of the Crispo decisions.
With respect to the plaintiff’s common law fraud claims — asserting that he was defrauded by defendants saying they would, then wouldn’t, buy Twitter — Chancellor McCormick says:
Defendants advance many arguments for dismissal. Once again, one suffices. Plaintiff has failed to adequately allege that Musk intended to induce him to buy or sell Twitter stock. There are no allegations that Musk lied when he first announced that he entered into the Merger Agreement, which led Plaintiff to buy Twitter stock. And Plaintiff does not allege that Musk lied when he sent the Termination Letter to induce Plaintiff to sell stock. Under Plaintiff’s theory, Musk sent the Termination Letter to gain leverage to renegotiate the deal price and not with intent to cause Plaintiff to act. This allegation does not support Plaintiff’s fraud claim.