Antitrust-Related Reverse Break-Up Fees in 2017 | Practical Law

Antitrust-Related Reverse Break-Up Fees in 2017 | Practical Law

A review of antitrust-related reverse break-up fees contained in private acquisition and public merger agreements in Practical Law's Antitrust Risk-Shifting Database from 2017. The Article discusses the size of reverse break-up fees, fee triggers, the industry breakdown, interaction with other antitrust-risk provisions, and other issues relating to antitrust-risk allocation.

Antitrust-Related Reverse Break-Up Fees in 2017

Practical Law Article w-012-8475 (Approx. 16 pages)

Antitrust-Related Reverse Break-Up Fees in 2017

by Practical Law Antitrust
Law stated as of 15 Mar 2018 • USA (National/Federal)
A review of antitrust-related reverse break-up fees contained in private acquisition and public merger agreements in Practical Law's Antitrust Risk-Shifting Database from 2017. The Article discusses the size of reverse break-up fees, fee triggers, the industry breakdown, interaction with other antitrust-risk provisions, and other issues relating to antitrust-risk allocation.
For the 2018 version of this resource, please click here.
In M&A transactions with foreseeable risk that the buyer will be unable to close, buyers and sellers often negotiate for the possible payment of a reverse break-up fee. Antitrust-related reverse break-up fees are termination fees payable by the buyer to the seller in a private acquisition or to the target company in a public merger, if the deal cannot close because of either:
  • A failure to obtain antitrust approvals required for the deal, including under the Hart-Scott-Rodino (HSR) Act.
  • A governmental authority enjoining the transaction under the antitrust laws.
Reverse break-up fees are a primary way to allocate antitrust risk in a purchase agreement where the parties are particularly concerned about obtaining antitrust approval, usually because the parties are competitors. If one of the antitrust agencies investigates or challenges a deal, the risk of not closing lies with the seller if there is no reverse break-up fee. This is because the seller may experience pre-closing losses during the investigation or litigation period, including:
  • Loss of customers.
  • Decline in valuation.
  • Departure of employees.
By charging the buyer a reverse break-up fee, the parties attempt to quantify these losses and allocate them to the buyer while also incentivizing the buyer to exert maximal efforts to obtain antitrust approval for the transaction.
Practical Law's Antitrust Risk-Shifting Database gathers and summarizes both private acquisition agreements and public merger agreements that contemplate a reverse break-up fee payable for antitrust failure. The Antitrust Risk-Shifting Database covers:
  • all public merger agreements for the acquisition of US reporting companies valued at $100 million or more and entered into since November 1, 2012; and
  • all publicly filed acquisition agreements entered into since June 1, 2012, valued at $25 million and involving the acquisition of:
    • all or substantially all of the assets of private US companies;
    • at least a majority of the outstanding stock of private US companies; or
    • at least a majority of the business units of US companies;
in each case where an HSR or other premerger filing is required and the agreement specifies the parties' efforts to get antitrust approval.
In 2017, the database found 38 deals that contained antitrust-related reverse break-up fees. For each of those 38 deals, this Article reviews and discusses:
  • The size of the fees.
  • The antitrust triggers for the fees.
  • Deals with tiered fees, in which different fee amounts are payable under different circumstances, all having to do with antitrust approval.
  • Deals with both an antitrust and non-antitrust triggered fee.
  • The interaction of the fees with other risk-shifting provisions in the agreement.
  • Extensions to the drop-dead date for antitrust reasons in deals with fees.
  • The industries in which the deals with antitrust-triggered fees are found.
For more information on antitrust-related reverse break-up fees, see Standard Clause, Purchase Agreement: Reverse Break-Up Fee for Antitrust Failure and Practice Note, What's Market: Reverse Break-Up Fees for Antitrust Failure.
To review the similar study performed in 2016, see Article, Antitrust-Related Reverse Break-Up Fees in 2016, and in 2015, see Article, Antitrust-Related Reverse Break-Up Fees in 2015.

Size of Antitrust-Related Reverse Break-Up Fees

Image 1 within Antitrust-Related Reverse Break-Up Fees in 2017​
Figure A illustrates the value of the antitrust-related reverse break-up fees for all 38 public and private deals in the Antitrust Risk-Shifting Database in 2017. The figure shows that of those fees:
  • Eight were set at 6% of the equity value or higher, including five public deals and three private deals. Of those fees, four were more than 7%, including in one private deal and three public deals.
  • Thirteen were set between 4% and 6% of the equity value, including seven public deals and six private deals.
  • Seven were set at 3% to 4% of the equity value, including seven public deals and no private deals.
  • Twelve were set at less than 3% of the equity value, including nine public deals and three private deals.
Two deals are included twice in Figure A (resulting in a total of 40 entries) because they each contained two antitrust-related reverse break-up fees:
(See Deals with Tiered Antitrust-Related Reverse Break-Up Fees.)
The largest antitrust-related reverse break-up fees of 2017 on a dollar basis were in:
The largest antitrust-related fees in terms of the percentage of the total deal value were in:
The average amount of all 2017 antitrust-related fees was 4.23% of the respective deal value, down approximately 9% from 4.67% in 2016 and down approximately 16% from 5.05% in 2015.
A total of eight (20%) out of the year's 40 reverse break-up fees payable for antitrust failure were set at 6% or more of the respective deal value. In 2016 and 2015, a higher number and percentage of deals contained fees set at 6% or more of the respective deal value, including:
  • In 2016, a total of nine (23%) out of the year's 40 reverse break-up fees payable for antitrust failure.
  • In 2015, a total of 12 (23%) of the year's 52 reverse break-up fees for antitrust failure.
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Figure B illustrates the value of the antitrust-related reverse break-up fees in the 26 public mergers covered in the Antitrust Risk-Shifting Database in 2017. Of these:
  • Six deals were valued at $5 billion or more. The column reflects eight data points because two deals had two relevant fees: the AltaGas Ltd./WGL Holdings, Inc. deal had two fees set at less than 3% of equity value and the Marvell Technology Group Ltd./Cavium, Inc. deal had one at less than 3% of equity value and one between 3% and 4% of equity value.
  • Thirteen deals were valued from $1 billion to $5 billion.
  • Three deals were valued from $500 million to $1 billion.
  • Four deals were valued from $100 million to $500 million.
Of the 26 public M&A deals containing antitrust-related reverse break-up fees, the largest:
Figure B indicates that while fees of all percentage amounts are observed in deals large and small, once deals reach the mega-sized bracket of $5 billion or more, reverse break-up fees payable for antitrust failure level off as a percentage of equity value. In 2017, in deals valued at $5 billion or more:
  • No fee of 6% or more of equity value or higher was observed. In 2016, there was only one fee in this category and there were no deals in this category in 2015.
  • Five fees of less than 3% were observed. In 2016, one fee of less than 3% was observed, and there were three deals in this category in 2015.
In the $1 billion to $5 billion category, the number of antitrust-related reverse break-up fees priced at 6% or more of the deal equity's value has declined in recent years. In 2017, two (approximately 15%) of the 13 reverse break-up fees payable for antitrust failure were priced at 6% or more of the deal's equity value. In that same category:
  • In 2016, three (approximately 21%) of the 14 fees were priced at 6% or more.
  • In 2015, half of the eight fees were priced at 6% or more.
In smaller public deals, buyers and target companies tend to use relatively larger antitrust-triggered reverse break-up fees. For example, in 2017, four of the seven fees (57%) in the $100 million to $500 million and $500 million to $1 billion equity-value categories were at least 4% of equity value. Similarly:
  • In 2016, five of the six fees (83%) in those categories were at least 4% of the deal value.
  • In 2015, five of the seven fees (71%) in those categories were at least 4% of the deal value.
The average size of antitrust-related reverse break-up fees in public M&A deals in 2017, as calculated from the 26 public M&A deals in the study sample, was approximately 4.05% of the respective deal's equity value. The average fee size declined from the 2016 average of 4.27% of the respective deal's equity value and from the 2015 average of 4.57%.
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Figure C includes the value of the antitrust-related reverse break-up fees in the twelve private deals in the Antitrust Risk-Shifting Database in 2017. Of these:
  • Four deals were valued at $1 billion or more, one of which was valued at greater than $5 billion.
  • Five deals were valued from $500 million to $1 billion.
  • Three deals were valued from $100 million to $500 million.
  • No deals were valued at less than $100 million.
Of the twelve private deals containing antitrust-related reverse break-up fees, the largest:
As in 2015 and 2016, the spread of reverse break-up fees across deal-size brackets in private acquisition agreements resembles the spread in public M&A deals.
Fees priced below 3% of deal value were not observed in the smallest deal-size bracket of $100 million to $500 million, as was the case in 2016. In 2015, fees priced below 3% of deal value were similarly not observed in the smallest deal-size brackets of $25 to $100 million. However, in 2017, fees of up to 3% of deal value were observed in the $500 million to $1 billion and the $5 billion or more category. Similarly, in 2016, fees of up to 3% of deal value were observed in the $500 million to $1 billion and $1 billion to $5 billion categories. In 2015, fees of this size were observed in deals ranging in value from $100 million to more than $1 billion.
Three (25%) of the twelve private deals contained a fee priced at 6% of the deal value or higher, with only one of those deals valued at $1 billion or more (the Apollo Global Management, LLC, Crestview Partners, and Reverence Capital Partners/Voya Insurance and Annuity Company and Directed Services LLC deal). The remaining two deals were valued from $600 million to $750 million.
In 2016, three (30%) of the ten private deals contained fees priced at 6% of the deal value or higher, with only one of those deals valued at $1 billion or more and the remaining two deals valued from $275 million to $400 million. In 2015, seven (30%) of the 23 private deals contained fees of 6% of the deal value or higher, with only one of those deals valued more than $5 billion and the remaining six deals valued from $40 million to $2.2 billion.

Industries

Figure D illustrates the target company's industry for the 38 deals in the Antitrust Risk-Shifting Database that contained antitrust-related reverse break-up fees. The Vulcan Materials Company/Aggregates USA, LLC deal appears twice in this chart because the target operated in both the construction and materials and mining and metals industries.
Image 4 within Antitrust-Related Reverse Break-Up Fees in 2017​
Within the Antitrust Risk-Shifting Database, those deals in 2017 that contained antitrust-related reverse break-up fees fell mainly within the following industries:
  • Food and beverage, which includes wholesale grocery, the development of products to enhance the nutritional integrity of foods, the production and distribution of food products, the manufacture and sale of snack foods, and online and mobile food ordering services (six deals).
  • Medical devices and healthcare, which includes occupational medicine and urgent care service providers, the development and sale of medical technology products and services for the treatment of diseases, such as kidney failure, and the ownership and operation of surgical facilities (five deals).
  • Telecommunications, which includes the ownership, lease and marketing of fixed wireless spectrum licenses in the US, the provision of earth-imagery, data and analysis, and telecommunications and IT services (four deals).
  • Computer and electronic equipment, which includes the design, development, and marketing of semiconductor processors for intelligent and secure networks worldwide, the provision of payment processing solutions to merchants, and the development and distribution of computer-aided engineering software (three deals).
  • Retailers, which includes a multi-channel retailer, casual franchise dining, and a national provider of institutional pharmacy, specialty infusion, and hospital pharmacy management services (three deals).
  • Oil and gas, which included a gas company operating division, an independent oil and natural gas company, and a distributor of natural gas (three deals).
The remainder of deals were spread across a wide variety of industries in 2017.
This represents a change in the mix of industries compared to previous years.
For example, in 2016, there were no deals with antitrust-related reverse break-up fees in the food and beverage or telecommunications industries and only one deal in the retail industry and the medical devices and healthcare industry.
Several industries that comprised the bulk of the deals in 2016 or 2015 saw fewer relevant deals in 2017. For example, the number of deals with antitrust-related reverse break-up fees for:
  • Computer and electronic equipment fell from eight deals in 2015 and nine deals in 2016 to three deals in 2017.
  • Manufacturing and machinery fell from four deals in 2016 to two in 2017.
  • Services fell from four deals in 2015 and 2016 to two in 2017.
  • Pharmaceuticals and biotechnology fell from four deals in 2015 to none in either 2016 or 2017.

Antitrust Triggers for Reverse Break-Up Fees

In the 38 deals with antitrust-related reverse break-up fees, the most common triggers included a fee that was payable if:
  • Either party terminated the agreement because of a final non-appealable order prohibiting or restraining the closing under an antitrust law (and, in some cases, at the time of termination, the antitrust approval conditions were also not satisfied). This trigger was found in 26 deals or approximately 68% of the time. In 2016, this provision was found approximately 88% of the time and, in 2015, approximately 86% of the time.
  • Closing did not occur by the drop-dead date and certain antitrust closing conditions were not satisfied, such as if antitrust approvals were not obtained or an injunction or other order under antitrust laws was issued, and where certain other closing conditions were satisfied or waived. This trigger was found in 35 deals or approximately 92% of the time. In 2016, this provision was found approximately 88% of the time and, in 2015, approximately 84% of the time.
Unique or notable antitrust triggers appeared in several deals.
For example, as in 2016, several deals specified that the antitrust-related reverse break-up fee was payable because of a failure to obtain approval under certain specified antitrust laws outside the US:
  • In Marvell Technology Group Ltd./Cavium, Inc., the reverse break-up fee was payable including if:
    • the transaction did not close by the drop-dead date or Cavium terminated the agreement because Marvell knowingly and intentionally breached its efforts obligations to obtain approval from the Ministry of Commerce of the People's Republic of China (MOFCOM); and
    • MOFCOM approval was not obtained without the imposition of a burdensome condition, such as an agreement to divest certain of the parties' specified assets (unless Marvell previously agreed to that condition in writing).
  • In Talos Energy LLC/Stone Energy Corporation, the reverse break-up fee was payable if either party terminated the merger agreement because the acquisition did not close by the drop-dead date and approval from the Mexican antitrust authority (the Federal Economic Competition Commission) was not obtained.
Similarly, several deals specified that the antitrust-related reverse break-up fee was payable because of a final non-appealable order under antitrust laws outside the US. For example:
  • In Aspen Skiing Company/KSL Capital Partners and Intrawest Resorts Holdings, Inc., the reverse break-up fee was payable if either party terminated the merger agreement because a final non-appealable order prevented Canadian antitrust approval.
  • In Gartner, Inc./CEB Inc., the reverse break-up fee was payable if either party terminated the merger agreement because a final non-appealable order under any non-US antitrust law set out in CEB's disclosure letter prevented the merger or was reasonably likely to result in either party being required to divest any assets or other specified limitations.
Two deals contained antitrust-related reverse break-up fees payable if HSR approval was not obtained because the buyer would not agree to divest certain assets:
In Vulcan Materials Company/Aggregates USA, LLC, the reverse break-up fee was payable if the HSR approval condition was not satisfied because Vulcan Materials did not agree to divest or hold separate either party's (or their affiliates') quarries in Georgia or operate them in a specific manner if Aggregates USA and its affiliates did not materially breach the antitrust and other regulatory approvals covenant.
In Campbell Soup Company/Snyder's-Lance, Inc., the reverse break-up fee was payable if HSR approval was not obtained or an order prohibited the merger under the HSR Act as a result of Campbell Soup's refusal to divest, license, or hold separate any of its or its subsidiaries' assets, businesses, or product lines.
Two deals contained antitrust-related reverse break-up fees that were payable if antitrust approvals imposed certain conditions the parties were unwilling to accept, including divestitures:
  • In Vistra Energy Corp./Dynegy Inc., the reverse break-up fee was payable if either party terminated the merger agreement for failure to close by the drop-dead date and the HSR Act approval or other specified governmental approvals imposed any condition or required any divestiture (other than certain specified divestitures) reasonably expected to cause a material reduction in the expected benefits of the merger.
  • In British American Tobacco p.l.c./Reynolds American Inc., the antitrust-related reverse break-up fee was payable if a law or order under antitrust law, among other things, required British American or the surviving corporation to divest either party's business, properties, or assets.
The CVS Health Corporation/Aetna Inc. deal had a unique provision requiring CVS to pay the reverse break-up fee if:
  • CVS failed to take appropriate action to contest an order or injunction preventing the merger under HSR or other antitrust laws within 30 days of its effective date and did not initiate proceedings within ten days' notice from Aetna of its intention to terminate.
  • All of CVS's closing conditions were satisfied, other than those relating to antitrust approvals.
In several deals, the antitrust-triggered reverse break-up fee was payable if the seller or target terminated the agreement because the buyer breached its antitrust efforts covenant. For example, in:
In 2017, Verizon Communications Inc.'s and AT&T Inc.'s competing bids for Straight Path Communications Inc. contained similar antitrust-related reverse break-up fee triggers, each requiring the buyer to pay the reverse break-up fee if the transaction did not close by the drop-dead date and the HSR approval condition was not satisfied.

Deals with Tiered Antitrust-Related Reverse Break-Up Fees

Two of the year's 38 deals contained a tiered antitrust-related reverse break-up fee, including:
  • The AltaGas Ltd./WGL Holdings, Inc. public merger deal, which had two potential antitrust-related fees of $68 million (1.06% of the deal value) and $182 million (2.84% of the deal value).
  • The Marvell Technology Group Ltd./Cavium, Inc. public merger deal, which had two potential antitrust-related fees of $50 million (0.85% of the deal value) and $180 million (3.01% of the deal value).
In 2016, three of the 36 deals (8%) contained tiered antitrust-related reverse break-up fees. In 2015, two of the 50 deals (4%) contained tiered antitrust-related reverse break-up fees.
The AltaGas Ltd./WGL Holdings, Inc. deal contained a tiered antitrust-related fee that provided that AltaGas was required to pay:
  • A lower antitrust-related reverse break-up fee of $68 million if either party terminated the agreement:
    • for failure to close by the drop-dead date and HSR approval or other regulatory approvals from the Committee on Foreign Investment in the US (CFIUS), the Federal Energy Regulatory Commission (FERC), or under state law (Non-Antitrust Approvals), were not obtained and no law or order prevented the transaction relating to Non-Antitrust Approvals (if certain other closing conditions were satisfied or waived); or
    • because of a final non-appealable order prohibiting the merger relating to Non-Antitrust Approvals (if certain closing conditions, other than antitrust-related conditions, were satisfied).
  • A higher antitrust-related reverse break-up fee of $182 million, less any $68 million reverse break-up fee previously paid, payable for the same reasons as the smaller fee, if in addition:
    • WGL would have been able to terminate the agreement because AltaGas breached its reasonable best efforts and governmental approvals efforts obligations relating to non-antitrust regulatory approvals under CFIUS, FERC, and state laws; and
    • certain of AtlaGas's other closing conditions (not antitrust-related) were satisfied or waived.
The Marvell Technology Group Ltd./Cavium, Inc. deal contained a tiered antitrust-related fee that provided that Marvell would be required to pay:
  • A lower antitrust-related reverse break-up fee of $50 million if:
    • either party terminated the agreement for failure to close by the drop-dead date or Cavium terminated the agreement because Marvell knowingly and intentionally breached its efforts obligations to obtain approval from MOFCOM; and
    • MOFCOM approval was not obtained without the imposition of a burdensome condition, such as an agreement to divest certain of the parties' specified assets (unless Marvell previously agreed to the condition in writing); and
    • all closing conditions were satisfied other than certain specified closing conditions (including the condition requiring CFIUS approval).
  • A higher antitrust-related reverse break-up fee of $180 million if:
    • either party terminated the agreement for failure to close by the drop-dead date or for failure to obtain CFIUS approval or Cavium terminated the agreement because Marvell knowingly and intentionally breached its obligations to obtain CFIUS approval;
    • MOFCOM approval was not obtained without the imposition of a burdensome condition (unless Marvell previously agreed to the condition in writing); and
    • all closing conditions were satisfied other than certain specified closing conditions (including that requiring CFIUS approval).
Both of the antitrust-related fees in these two large deals (both valued more than $5 billion) were payable at the higher level on the buyer's breach of its efforts to obtain CFIUS approval if certain closing conditions were not satisfied, including receipt of specified antitrust approvals.

Deals with Antitrust and Non-Antitrust Reverse Break-Up Fees

Eight of the 38 surveyed deals (21%) contained an additional reverse break-up fee payable for circumstances not having to do with antitrust. In four of those deals, the antitrust-related reverse break-up fee was substantially higher than the non-antitrust-related reverse break-up fee.
For example, the Walt Disney Company/Twenty-First Century Fox, Inc. deal contained two reverse break-up fees, only one of which was payable for antitrust reasons. In that deal, the antitrust-related reverse break-up fee was substantially higher than the non-antitrust-related reverse break-up fee. The agreement in that deal provided for:
  • A $2.5 billion reverse break-up fee payable for antitrust failure, including if either party terminated the merger agreement because:
    • a final non-appealable order prohibited the merger under antitrust law; or
    • the merger did not close by the drop-dead date and HSR Act or other antitrust approvals were not obtained.
  • A $1.525 billion reverse break-up fee payable for fiduciary-related concerns, such as if Walt Disney entered into an agreement for a superior proposal.
The Kohlberg Kravis Roberts & Co. L.P./Walgreens Boots Alliance, Inc., and PharMerica Corporation deal contained two reverse break-up fees, only one of which was payable for antitrust reasons. In that deal, the antitrust-related reverse break-up fee was approximately twice as much as the non-antitrust-related reverse break-up fee. The agreement in that deal provided for:
  • A $113.3 million fee payable for antitrust failure, including if:
    • KKR willfully breached its antitrust approval obligations;
    • the merger did not close by the drop-dead date; and
    • required antitrust approvals were not obtained or an order prohibited the merger under antitrust laws, including because KKR did not agree to make divestitures causing a burdensome condition, meaning those reasonably expected to result in an annual loss of net sales revenues to KKR (and post-closing, to KKR and the surviving corporation) in excess of $85 million.
  • A $56.6 million fee payable for KKR's failure to close.
The MacDonald, Dettwiler and Associates Ltd./DigitalGlobe, Inc. deal also contained two reverse break-up fees, only one of which was payable for antitrust reasons. In that deal, the antitrust-related reverse break-up fee was substantially higher than the non-antitrust-related reverse break-up fee. The agreement in that deal provided for:
  • A $150 million reverse break-up fee payable for antitrust failure, including if DigitalGlobe obtained stockholder approval and a final non-appealable order enjoined, prohibited, or made the merger illegal under antitrust law.
  • An $85 million reverse break-up fee payable for fiduciary-related concerns, such as if DigitalGlobe failed to reject a competing tender offer.
Similarly, the Penn National Gaming, Inc./Pinnacle Entertainment, Inc. deal also contained two reverse break-up fees, only one of which was payable for antitrust reasons. In that deal, the antitrust-related reverse break-up fee was more than twice the amount of the non-antitrust-related reverse break-up fee. The agreement in that deal provided for:
  • A $125 million reverse break-up fee payable for antitrust failure, including if a final non-appealable injunction prohibited the merger relating to antitrust laws or for failure to obtain HSR approval.
  • A $60 million reverse break-up fee payable for fiduciary-related concerns, such as if Penn National failed to reject a competing tender offer
However, in four of the deals with more than one reverse break-up fee, the antitrust-related reverse break-up fee was significantly less than the other fee:
  • In the British American Tobacco p.l.c. and Reynolds American Inc. deal, the antitrust-related reverse break-up fee of $500 million was half as much as the non-antitrust-related reverse break-up fee of $1 billion. In that deal:
    • the $500 million reverse break-up fee was payable for antitrust failure, including if a final non-appealable law or order prevented, prohibited, or made the merger illegal under an antitrust law; and
    • the $1 billion reverse break-up fee was payable for fiduciary-related concerns, such as if British American Tobacco entered into a definitive agreement for an alternative proposal.
  • In the AltaGas Ltd. and WGL Holdings, Inc. deal, which contained two antitrust-related reverse break-up fees, the $205 million reverse break-up fee payable for failure to obtain financing was more than three times the size of the smaller, $68 million antitrust-related reverse break-up fee, and more than $20 million larger than the $182 million antitrust-related reverse break-up fee (see Deals with Tiered Antitrust-Related Fees).
  • In the Campbell Soup Company/Snyder's-Lance, Inc. deal, the antitrust-related reverse break-up fee of $50 million was almost one-fourth the size of the reverse break-up fee of $198.6 million payable for Campbell Soup's failure to close, when required.
  • In the Select Medical Holdings Corporation/U.S. HealthWorks, Inc. deal, the antitrust-related reverse break-up fee of $17.5 million was less than the $25 million reverse break-up fee payable for Select Medical's breach or failure to close when required.
In 2016, three of the 36 surveyed deals (8%) contained an additional fee that did not relate to antitrust risk. In 2015, nine of the 50 surveyed deals (18%) contained an additional fee that did not relate to antitrust risk.

Interaction with Other Risk-Shifting Provisions

The reverse break-up fee is not the only mechanism that parties rely on to allocate antitrust risk. Buyers and sellers can also negotiate covenants that obligate the buyer to litigate against disapproving antitrust agencies, divest assets to gain antitrust approval, or more. Of the 38 transactions in the Antitrust Risk-Shifting Database that contained antitrust-related reverse break-up fees in 2017:
  • Two deals (5%) had a hell-or-high-water provision, meaning a provision requiring the buyer to take any and all action to obtain antitrust approval, including litigating antitrust issues and making any required divestitures. In 2015 and 2016, a slightly higher percentage of deals (8% and 11% respectively) had a hell-or-high-water provision (see Figure E).
  • Twenty-two deals (58%) (down from 25 deals or 69% in 2016) had a provision requiring the buyer to litigate antitrust issues with no express limitations, including the two deals containing hell-or-high-water provisions. In five deals (13%) (down slightly from eight deals or 22% in 2016), by contrast, the buyer had no obligation to litigate antitrust issues. In nine deals (24%) (up from two deals or 6% in 2016), the agreement did not specify the buyer's obligation to litigate antitrust issues. In two deals (5%) (up from one deal or 3%, in 2016), the agreement provided specific limitations on the buyer's obligation to litigate antitrust issues (see Figure F).
  • In eight deals (21%), the buyer had no obligation to make divestitures of either party's assets to resolve antitrust concerns. This number was down from 2016, where there were seven deals with this provision (19%) (see Figure G).
  • In two deals (5%), the buyer had an unconditional obligation to make divestitures of either party's assets to resolve antitrust issues. Those deals each contained a hell-or-high-water clause. In 2016, four deals (11%) had this provision, each of which contained a hell-or-high-water clause (see Figure G).
  • In three deals (8%), the agreement did not specify the buyer's obligation to make divestitures to remedy antitrust issues. In 2016, only one deal had this provision (3%). In 2015, a similar percentage of deals to 2016 had this provision (4%) (see Figure G).
  • Twenty-five deals (66%) had a provision limiting the buyer's obligation to divest either both parties' assets or one party's assets, short of flatly releasing the buyer from any obligation to make any divestitures at all. In 2016 and 2015, respectively, a similar percentage of deals had this provision (67% and 60%). Of the 25 deals:
    • twelve deals (48%) had a provision providing that the buyer would agree to certain specified divestitures (in 2016, eleven deals or 46%);
    • three deals (12%) had a provision limiting the buyer's obligation to divest both parties' assets or just one party's assets to a divestiture cap, such as a certain dollar value or another measure of value (in 2016, nine deals or 38%);
    • six deals (24%) had a provision stating the buyer had no obligation to make divestitures if doing so would be burdensome (in 2016, five deals or 21%);
    • in six deals (24%), the buyer had no obligation to make divestitures if doing so would be materially adverse (in 2016, five deals or 21%); and
    • in seven deals (28%), the buyer had no obligation to make divestitures of both parties' assets or just of seller's assets if doing so would have a Material Adverse Effect (MAE) (in 2016, six deals or 25%).
(See Figure G.)
For more information on antitrust risk-shifting provisions, including when to use those provisions in a purchase agreement and how to structure those provisions, see Antitrust Risk-Shifting Toolkit. For a sample hell-or-high-water provision that can be used in a purchase agreement, see Standard Clause, Purchase Agreement: Hell or High Water Clause. For a standard clause limiting divestitures, see Standard Clause, Purchase Agreement: Limits on Potential Divestitures.
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Drop-Dead Date Extensions in Deals with Antitrust-Related Reverse Break-Up Fees

Of the 38 deals in the Antitrust Risk-Shifting Database that contained antitrust-related reverse break-up fees in 2017, 28 (74%) also contained antitrust-related extensions to the drop-dead date. These provisions generally provided that if all closing conditions were satisfied by the drop-dead date other than receipt of antitrust approval, including HSR approval, either party was able extend that date to the date specified in the agreement. Five of the 38 deals provided for an initial drop-dead date extension and a second extension if the antitrust approval was not received by the initial extended date.
Of the 28 deals containing drop-dead date extensions with an antitrust-related trigger:

Table of Transactions

A table providing the information for each transaction surveyed in this year's study can be found here.