The New Look of Deal Protection

Stanford Law Review 69 (2017), Forthcoming

52 Pages Posted: 13 Aug 2016

See all articles by Fernan Restrepo

Fernan Restrepo

University of California - Los Angeles

Guhan Subramanian

Harvard Business School

Date Written: August 2016


Deal protection in M&A deals 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, have become ubiquitous by the 2010s; (3) asset lockups, which disappeared from the landscape for thirty years, have re-emerged, 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.

Suggested Citation

Restrepo, Fernan and Subramanian, Guhan, The New Look of Deal Protection (August 2016). Stanford Law Review 69 (2017), Forthcoming, Available at SSRN:

Fernan Restrepo (Contact Author)

University of California - Los Angeles ( email )

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Guhan Subramanian

Harvard Business School ( email )

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Morgan 270C
Boston, MA 02163
United States
617-495-9784 (Phone)
617-496-7379 (Fax)

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