Termination Rights and Fees in Acquisition Agreements

Summary

Termination provisions grant one or more of the parties to an acquisition agreement the right to walk away from the transaction during the period between signing and closing. In the absence of an explicit termination provision, the parties will have to wait until the agreement's drop-dead date (if there is one) or until it is objectively clear that the closing conditions can never be met before the agreement can be terminated by a party acting unilaterally, even if a closing condition has failed. Moreover, termination provisions set forth the consequences of termination. Termination will typically result in each party having no further obligations to the other, except for any liability arising from any breach of the acquisition agreement. Under some circumstances, one party may be obligated to compensate the other party for expenses or fees upon termination of the acquisition agreement. If there are any obligations in the acquisition agreement that should survive termination, such as ...