Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • April 2017
  • Article
  • Stanford Law Review

The New Look of Deal Protection

By: Guhan Subramanian and Fernán Restrepo
  • Format:Print
ShareBar

Abstract

Deal protection in mergers and acquisitions (M&A) evolves in response to Delaware case law and the business goals of acquirers and targets. We construct a new sample of M&A deals from 2003 to 2015 to identify four such areas of evolution in current transactional practice: (1) termination fee "creep," which was pervasive in the 1980s and 1990s, seems to have gone away by the 2000s; (2) match rights, which were unheard of in the 1990s, became ubiquitous by the 2010s; (3) asset lockups, which disappeared from the landscape for thirty years, have reemerged, though in a "new economy" variation; and (4) practitioners have begun implementing side agreements to the deal that have a commercial purpose along with a deal protection effect. We offer three recommendations for how the Delaware courts should approach this "new look" to the deal protection landscape. First, courts should clarify that lockups must survive Unocal/Unitrin "preclusive" or "coercive" analysis in addition to Revlon "reasonableness" review. Second, Delaware courts should apply basic game theory to identify the deterrent effect of match rights and new economy asset lockups. And third, Delaware courts should take a functional approach to deal protection, meaning that collateral provisions that have a deal protection effect should be scrutinized under deal protection doctrine, even if these agreements have a colorable business purpose as well.

Keywords

Mergers and Acquisitions; Practice

Citation

Subramanian, Guhan, and Fernán Restrepo. "The New Look of Deal Protection." Stanford Law Review 69, no. 4 (April 2017): 1013–1074.
  • Find it at Harvard

About The Author

Guhan Subramanian

Negotiation, Organizations & Markets
→More Publications

More from the Authors

    • November 2021
    • Faculty Research

    LKQ-Stahlgruber

    By: Guhan Subramanian and Caeden Brynie
    • June 2021
    • Columbia Law Review

    Deals in the Time of Pandemic

    By: Guhan Subramanian and Caley Petrucci
    • May 2021
    • Faculty Research

    LVMH's Bid for Tiffany & Co.

    By: Guhan Subramanian, Julian Zlatev and Raseem Farook
More from the Authors
  • LKQ-Stahlgruber By: Guhan Subramanian and Caeden Brynie
  • Deals in the Time of Pandemic By: Guhan Subramanian and Caley Petrucci
  • LVMH's Bid for Tiffany & Co. By: Guhan Subramanian, Julian Zlatev and Raseem Farook
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College