Termination Provisions in M&A Transaction Agreements

Summary

This practice note discusses considerations in drafting and negotiating termination provisions in the acquisition agreement for an M&A transaction. In mergers and acquisitions, where the closing of the transaction (or, in the case of a merger, the effective time of the merger) occurs on a date that is later than the signing date, the principal transaction agreement will generally contain various termination rights that allow one or more parties to terminate the agreement and abandon the transaction prior to closing. Termination provisions also set forth the consequences of termination, including any monetary or other remedies that the parties have agreed will apply in case of termination. The main benefit of including termination provisions is to allow the parties to discontinue the transaction as soon as a triggering event occurs, rather than being forced to wait until a pre-agreed termination date or until it becomes clear that the closing conditions will never be satisfied. This in ...