Deal Protections: Market Practice Analysis

Against the background of a growing merger and acquisition market, a swelling number of bidders seek protection for their deals.

Part one of this series explored the interplay between the counterparties once a business combination has been agreed upon and provided an overview of deal protection mechanisms available to both target and bidding companies.

Part two of this series explores how to craft a deal protection package that delivers the right tension of protection, while adhering to the various regulatory and legal constraints to a business combination.

There is no definitive catalogue of deal protection mechanisms, because the term describes a class of mechanisms that are both fluid and flexible. Several devices, such as no-shop, confidentiality and break fees have emerged as standard in business combination transactions, whereas other, more exotic deal protection mechanisms have been deployed with varying degrees of success.