Notice of Termination of Acquisition Agreement

Summary

This template Notice of Termination of Acquisition Agreement can be used by a party to an acquisition agreement to provide notice to the other party that it is terminating the agreement and the grounds for such termination. This template includes practical guidance, drafting notes, and alternate and optional clauses. Termination provisions in an acquisition agreement grant one or more of the parties the right to walk away from the transaction after signing. There are a number of events that may give rise to a termination right, including: • The other party's breach of its representations, warranties, covenants, or agreements • Failure to satisfy closing conditions by a specified date • Failure to receive required regulatory approvals • Failure to receive required stockholder approvals • Company board failure • Fiduciary out • Acquirer's failure to obtain financing • Failure to complete a tender offer • A material decline in the buyer's stock price • Deal-specific matters (e.g., receiving a patent on a new product, closing another acquisition or sale, etc.) For further discussion of termination triggers, see Termination Triggering Events in M&A Transaction Agreements. Generally, termination of an acquisition agreement will become effective once the non-terminating party receives notice of termination from the terminating party following the occurrence of a triggering event. Providing proper notice of termination of an acquisition agreement is critical, as a party's ability to effectively end the agreement may be delayed or even forfeited by a failure to give timely and proper notice. A notice of termination of an acquisition agreement should reference the acquisition agreement, the applicable provisions of the acquisition agreement, and an explanation of the basis for termination. The notice should contain enough information for the receiving party to evaluate whether the termination is justified, whether any fees are payable (e.g., termination fee, expense reimbursement, etc.), and whether there is an applicable cure period, extension, or exclusion that would affect the terminating party's ability to terminate the acquisition agreement. Acquisition agreements usually have a notice provision to specify the manner of delivery and time of effectiveness of required or permitted notices. Notice provisions may be negotiated to be either strict or flexible, therefore it is imperative to review and comply with the notice requirements specified in the underlying acquisition agreement. You should also carefully review the termination provisions of the acquisition agreement for which the notice of termination is being provided and ensure the notice is sent to the proper parties and individuals in the manner required by the notices provision in the acquisition agreement. For more information regarding termination rights, see Termination Provisions and Fees Checklist, Termination Rights and Fees in Acquisition Agreements, Termination Triggering Events in M&A Transaction Agreements, Termination Provisions (M&A Transaction), and Market Trends 2022: Termination Fees. For more information regarding notice provisions, see Notice Clause and Critical Boilerplate in Acquisition Agreements.