Private M&A Flashcards
Readings (16 cards)
Klausner & Subramanian – The Economic Structure of Business Transactions Chapter II
Contracts in M&A allocate risk under uncertainty and information gaps using tools like MAC clauses, warranties, and strategic design—not to eliminate risk, but to manage it efficiently.
Dierickx & Koza – Information Asymmetries: How Not to Buy a Lemon
Information asymmetry in M&A leads to adverse selection and distrust, which parties mitigate through tools like warranties, earnouts, and relational trust.
Claire Hill – Why Contracts Are Written in Legalese
Contracts stay complex and archaic not for clarity but due to lawyer habits, risk-aversion, and a system that rewards precedent over simplification.
Choi & Triantis – Strategic Vagueness in Contract Design
Vagueness in contracts—especially MAC clauses—is a deliberate strategy to reduce costs, preserve flexibility, and enable renegotiation under uncertainty.
Cathy Hwang – Deal Momentum
Non-binding agreements function as soft commitments that build deal momentum through reputational and organizational signaling, not enforceability.
Practical Law – Warranties and Indemnities
Warranties offer broad risk allocation and disclosure incentives, while indemnities target specific risks with easier recovery—both central to M&A risk management.
Rafal Zakrzewski – Representations and Warranties Distinguished
Warranties and representations have different remedies; only representations allow misrepresentation claims—precise drafting is crucial to limit or expand liability.
Klausner & Subramanian – Deals: The Economic Structure of Business Transactions Chapter III
Earnouts and CVRs bridge valuation gaps in M&A by aligning incentives, but are risky and complex to implement.
Brian Quinn – The Performance of Earnouts in Corporate Acquisitions
Earnouts are better seen as tools for managing shared uncertainty—not as signals of seller confidence.
Gilson & Schwartz – Understanding MACs: Moral Hazard in Acquisitions
MAC clauses promote seller investment by protecting against buyer walkaways for market-wide events, not just value drops.
Eric Talley – On Uncertainty, Ambiguity, and Contractual Conditions
MACs mainly allocate uncertainty, with clauses adapting to ambiguity by excluding systemic risks and focusing on firm-specific harm.
Subramanian & Petrucci – Deals in the Time of Pandemic
COVID-19 shifted focus from MACs to ordinary course covenants as the key termination tool in M&A, prompting major drafting changes.
Bobby Reddy – Locked Box vs PPA in UK/US PE
UK PE prefers locked box pricing for certainty and clean exits; US favors post-closing adjustments for buyer protection, though locked box is gaining US interest.
Sean Griffith – Representation and Warranty Insurance (RWI)
RWI shifts post-closing liability from sellers to insurers, enabling clean exits and faster deals, but raises concerns about moral hazard and adverse selection.
Stephen Bainbridge – LVMH/Tiffany MAC Dispute
The LVMH–Tiffany case shows MAC clauses are hard to invoke legally but useful as renegotiation tools; post-COVID, MAC clauses now more often include explicit pandemic carveouts.
BM Brazil v Sibanye (2024 EWHC 2566)
The court held no valid MAE occurred; Sibanye’s attempt to terminate the deal failed, affirming the high legal bar for invoking MAE clauses under English law.
