Negotiating Covenants and Closing Conditions in M&A Transactions: Practical Tactics and Techniques

Crafting Provisions that Protect Buyer and Seller Interests and Minimize Legal Disputes

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, September 9, 2015

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will provide guidance to deal counsel for negotiating covenants and closing conditions in an M&A transaction, highlighting common areas of confusion, dispute and litigation.

Description

Covenants and closing conditions are among the most important clauses in an M&A transaction and are heavily negotiated by deal parties at the front end of the deal. Counsel to buyers and sellers must strategically draft and negotiate these provisions to ensure their respective rights are protected before and after the deal closes.

Covenants require or restrict certain conduct by the parties between the date the acquisition agreement is signed and the date the deal closes. Closing conditions outline steps the parties must complete before the deal may close. Deal counsel negotiating and drafting these important provisions must understand the current trends in the market and areas in which confusion, disputes and litigation are likely to arise.

Listen as our authoritative panel of M&A practitioners reviews the latest legal developments related to covenants and closing conditions and discusses strategies for sellers and buyers negotiating them, including how to avoid common areas of confusion, disputes and litigation.

READ MORE

Outline

  1. Drafting and negotiating covenants
    1. Distinguish public vs. private, Delaware vs. other state
    2. Tailor to deal size, type and industry
    3. Key covenants
      1. Continued operation of the business
      2. No solicitation/No shop, Go shop?
      3. Best efforts vs. absolute obligation
      4. Confidentiality
      5. Stockholder approval if needed
      6. No dividends or distributions
      7. No bonuses, salary increases or grant of stock options, warrants, etc. outside of existing obligations
      8. No hiring/termination outside ordinary course of business
      9. No contractual commitments outside ordinary course of business
      10. No amendments to corporate organizational documents
      11. No increases in financial obligations in non-trade excess of $X without Buyer’s consent
      12. No net CAPEX in excess of $X without Buyer’s consent; preservation of existing capital base
      13. Compliance with law and contract
      14. Maintenance of IP
      15. Compliance with privacy ‘laws’
      16. No change in accounting methods
      17. Remedies and survival
  2. Drafting and negotiating closing conditions for the benefit of each party
    1. Tailor to deal size and industry
    2. Key closing conditions
      1. Hart-Scott-Rodino Act filing
      2. Regulatory approvals
      3. Pending litigation
      4. Consents to transfer/assign material agreements (customer, supplier, union, etc.)
      5. Employment agreements signed by key employees
      6. Post-closing adjustments to purchase price
      7. Non-compete and Non-solicitations
      8. Buyer financing contingency
      9. No material adverse changes; specify standard
      10. Satisfactory customer visits
      11. Exercise of appraisal rights by no more than X% of shareholders
      12. No material decline in inventory value
      13. No departure of key employees
      14. No notice of disputes with customers or other

Benefits

The panel will review these and other key issues:

  • What covenants are important to include and carefully negotiate in the M&A agreement?
  • What closing conditions are important to include and carefully negotiate in the M&A agreement?
  • What are common areas of confusion and dispute with covenants and closing conditions and how can counsel best avoid them?

Faculty

Martin B. Robins
Martin B. Robins

Partner
FisherBroyles

Mr. Robins practices extensively in the general corporate and corporate governance, M&A, finance, intellectual...  |  Read More

Samuel M. Shafner
Samuel M. Shafner

Member
FisherBroyles

Mr. Shafner is a business, corporate and securities lawyer for over 25 years. His clients range from young...  |  Read More

Michael M. Sullivan
Michael M. Sullivan

Member
Taylor English Duma

Mr. Sullivan’s principal areas of concentration include general corporate, commercial and business matters,...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$297

Download

$297