Summary: No-Shops: Termination and Forcing the Vote

1 Min Read By: Hotshot

This is a summary of the Hotshot course “No-Shops: Termination and Forcing the Vote,” covering termination of a deal for a superior proposal, break-up fees, and a look at what it means to “force the vote.” View the course here.

  • If the target company’s board changes its recommendation, the buyer has the right to terminate the merger agreement.
  • If the board determines that a competing bid actually is a Superior Proposal (not just one that could be) and changes its recommendation, then the target often has the right to terminate the agreement too.
Force the Vote
  • Sometimes, instead of letting the target terminate the deal to take a Superior Proposal, the buyer may negotiate for a “force the vote” provision.
    • This requires that the target board put the original transaction in front of its shareholders, so they can decide whether to take it despite the board’s changed recommendation.
      • The principal impact is that it grants a timing and tactical advantage over the competing bid.
Break-up Fees
  • If either the target or the buyer does terminate the deal, then the target must pay the buyer a break-up fee.
    • Fees aren’t very high, usually ranging around 2% to 4% of the deal value.
      • That’s because of case law developed over the years to ensure that fees don’t preclude competing bids.

This course also includes interview footage with Jenny Hochenberg from Freshfields Bruckhaus Deringer and Igor Kirman from Wachtell, Lipton, Rosen & Katz.

Download a copy of this summary here.

By: Hotshot


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