Are M&A Lawyers Really Better?

46 Pages Posted: 22 Aug 2020 Last revised: 3 Jun 2021

See all articles by Stephen J. Choi

Stephen J. Choi

New York University School of Law

Mitu Gulati

University of Virginia School of Law

Robert E. Scott

Columbia University - Law School

Date Written: June 1, 2021


This article studies the impact of exogenous legal change on whether and how lawyers across four different deal types revise their contracts’ governing law clauses in order to solve the problem that the legal change created. The governing law clause is present in practically every contract across a wide range of industries and, in particular, it appears in deals as disparate as private equity M&A transactions and sovereign bond issuances. Properly drafted, the clause increases the ex ante economic value of the contract to both parties by reducing uncertainty and litigation risk. We posit that different levels of agency costs are the motivating factors that influence beneficial innovations in governing law clauses as well as their mirror opposite, costly encrustations. Our data show that lawyers who draft private equity M&A deals pay more attention to the deal terms than lawyers producing corporate and sovereign bond contracts. Because agency costs are low in the private equity setting, we observe significantly more innovation in private equity deals as compared to sovereign and corporate bond transactions where the agency problems of drafting lawyers are much greater. More surprising, we also find that contracts drafted by private equity M&A lawyers have more obsolete and encrusted terms than the contracts of the other deal types. Our conjecture is that the lawyers' dominant drafting strategy is to find examples of a desired term in other documents and import that language verbatim into the contract together with other redundant and obsolete terms including, on occasion, terms that may harm the clients' interests if retained in the contract.

Keywords: contracts, innovation, encrustation, private equity, stickiness, boilerplate, private equity

JEL Classification: K12, K22

Suggested Citation

Choi, Stephen J. and Gulati, Mitu and Scott, Robert E., Are M&A Lawyers Really Better? (June 1, 2021). Duke Law School Public Law & Legal Theory Series No. 2020-57, Available at SSRN: or

Stephen J. Choi (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Mitu Gulati

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Robert E. Scott

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-0072 (Phone)

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