Unbundled Bargains: Multi-Agreement Dealmaking in Complex Mergers and Acquisitions

50 Pages Posted: 6 Jan 2016 Last revised: 1 Mar 2017

Cathy Hwang

Stanford Law School; University of Utah - S.J. Quinney College of Law

Date Written: January 6, 2016

Abstract

Why are some bargains memorialized in dozens of related agreements, rather than one definitive agreement? This Article uses mergers and acquisitions (M&A) deals as a lens through which to understand why some bargains are governed by arrangements that this Article calls “unbundled bargains.” In an unbundled bargain, elements of a complex deal are broken out and memorialized in separate, but related, agreements. Unbundled bargains are common in M&A deals — these deals are governed by a definitive acquisition agreement, and also by employment agreements, transition services agreements, intellectual property assignment agreements, and many other ancillary agreements that shape the deal’s terms.

This Article shows that the boundaries of a deal extend beyond the acquisition agreement and into the manifold parts of an unbundled bargain. In the process, this Article makes three contributions to the literature. First, it provides a comprehensive account of why ancillary agreements exist, and shows that M&A deals are, invariably, governed by unbundled bargains. Second, it shows that unbundled bargains reduce dealmaking costs ex ante and deal enforcement costs ex post by making deals more modular and improving the quality of each modular part. Third, it shows that reframing many related agreements as one unbundled bargain has significant implications for contract theory and transactional practice.

Keywords: unbundled bargains, complex M&A, contract theory, deal design, ancillary agreements

JEL Classification: K1, K12

Suggested Citation

Hwang, Cathy, Unbundled Bargains: Multi-Agreement Dealmaking in Complex Mergers and Acquisitions (January 6, 2016). 164 University of Pennsylvania Law Review, 2016, p. 1403; Rock Center for Corporate Governance at Stanford University Working Paper No.213. Available at SSRN: https://ssrn.com/abstract=2711717

Cathy Hwang (Contact Author)

Stanford Law School ( email )

Crown Quadrangle
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

University of Utah - S.J. Quinney College of Law ( email )

383 S. University Street
Salt Lake City, UT 84112-0730
United States

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