Contractual Remedies in Mergers: Lessons from Crispo v. Musk

38 Pages Posted: 29 Apr 2024 Last revised: 3 Jul 2024

See all articles by Dhruv Aggarwal

Dhruv Aggarwal

Northwestern Pritzker School of Law

Albert H. Choi

University of Michigan Law School; European Corporate Governance Institute (ECGI)

Geeyoung Min

Michigan State University College of Law

Date Written: June 30, 2024

Abstract

The Delaware Chancery Court recently restricted a merger target's ability to recover damages on behalf of its shareholders from a breaching buyer. This paper investigates the impact of the decision. First, we present a theoretical analysis to generate empirical predictions. Second, we show that the decision led to a decrease in the firm value of targets in mergers governed by Delaware law. Third, we hand-collect relevant provisions from merger agreements and find that the agreements governed by Delaware law increasingly include target-friendly non-price terms after the decision. We also present evidence suggesting deal price responds to the inclusion of novel non-price terms. Overall, the paper demonstrates how remedy provisions play an important role in merger transactions and how contracting parties respond to an exogenous change in deals jurisprudence.

Suggested Citation

Aggarwal, Dhruv and Choi, Albert H. and Min, Geeyoung, Contractual Remedies in Mergers: Lessons from Crispo v. Musk (June 30, 2024). Northwestern Law & Econ Research Paper No. 24-03, Northwestern Public Law Research Paper No. 24-09, Available at SSRN: https://ssrn.com/abstract=4810882 or http://dx.doi.org/10.2139/ssrn.4810882

Dhruv Aggarwal

Northwestern Pritzker School of Law ( email )

750 N. Lake Shore Drive
Chicago, IL 60611
United States

Albert H. Choi (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

HOME PAGE: http://www.law.umich.edu/FacultyBio/Pages/FacultyBio.aspx?FacID=alchoi

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/albert-h-choi

Geeyoung Min

Michigan State University College of Law ( email )

East Lansing
United States

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