Covenants in Acquisition Agreements

Summary

Covenants are ongoing promises by a party to take, or refrain from taking, certain actions in the future. In the acquisition agreement, covenants obligate the parties to perform, or prohibit them from performing, certain acts that are meant to preserve the value of the target business and ensure that the transaction is consummated. This practice note discusses the typical covenants found in an acquisition agreement and the considerations for an M&A practitioner in drafting and negotiating these provisions. Click here to see recent examples of publicly filed acquisition agreements containing material adverse effect covenants in Market Standards M&A.