Financing Failure Financing Condition
(M&A Transaction)

Summary

This clause is a financing failure financing condition (or "financing out") which reallocates financing-related risk that can arise during the interim period between signing and closing in an M&A transaction from the buyer to the seller. This clause includes practical guidance, drafting notes, and optional clauses. A financing condition in an acquisition agreement provides the buyer with a right to terminate the transaction (commonly known as a "walk right") in the event that that the buyer is not able to secure financing to fund the acquisition. Financing conditions are most commonly employed by private equity buyers in leveraged buyouts where a substantial portion of the purchase price is borrowed. For further discussion of financing conditions, see Financing Conditions for a simple financing condition, see Strict Financing Condition (M&A Transaction). Also, see Negotiating Conditions Precedent: Material Adverse Change, Due Diligence, and Other Conditions Precedent.