Antitrust Covenants in the Spotlight Following Recent Failed Mergers

When the consummation of a transaction is subject to regulatory clearances or shareholder approvals, merging parties must allocate the risks created by these conditions precedent as part of their broader merger negotiations. Risk allocation clauses can create hazards for both buyers and sellers in transactions with material antitrust issues. In practice, merger agreements among competitors can leave one or both parties exposed if the deal fails to receive antitrust clearance. Although sellers may prefer provisions that place more of the antitrust clearance risk on the buyer, and vice versa, the language on which the parties ultimately agree will depend on their relative bargaining positions, priorities, and perceptions of the risk of failing to obtain clearance.