Best Efforts and Commercially Reasonable Efforts in M&A Agreements: Drafting and Interpretation Challenges

Description

Parties to M&A agreements generally negotiate clauses in the deal documents requiring one or both parties to use their “best efforts” to secure stockholder approvals, antitrust and other regulatory approvals, opinion letters, financing and/or third-party consents prior to deal closing. In some states, “reasonable efforts” or “commercially reasonable efforts” provisions are instead used to convey the parties’ expected performance under the contract.

When a deal fails to close and disputes between the buyer and seller arise, interpreting efforts clauses often presents challenges for the parties, M&A counsel and the courts. Because counsel often fail to clearly define the actions that constitute “best efforts,” “commercially reasonable efforts,” or some variation thereof, courts have had a difficult time interpreting efforts clauses. While there is limited court guidance on this issue, a recent Delaware Court of Chancery case, Williams Companies v. Energy Transfer Equity L.P., provides some clarity on how Delaware courts will interpret efforts language.

Listen as our authoritative panel examines how courts have ruled in disputes centered around best efforts, reasonable efforts and commercially reasonable efforts clauses in M&A deal documents. The panel will discuss best practices for drafting clear and predictable efforts provisions that adequately reflect the parties’ expectations.