What Drives the Variation in Takeover Contracts: The Economics or the Lawyers?

Abstract:     
We use proprietary data on 151 takeover contracts to study to what extent economic determinants and the styles of legal advisors explain variation in the number of warranties and covenants. We find that economic determinants account for 39% of the variation in warranties and for 34% of the variation in covenants. Law firm and partner fixed effects explain an additional part of the variation and their effect depends highly on the type of contract provision. Our findings suggest that takeover contracts reflect both the underlying economic conditions and the styles (i.e., preferences or biases) of the involved legal advisors.

Number of Pages in PDF File: 56

Keywords: Mergers and Acquisitions, Takeover Contracts, Legal Advisors

JEL Classification: G34, G24

working papers series