To Best Draft, Negotiate M&A Deals, Attorneys Must Understand Terms, Market

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By Yin Wilczek

June 9 — Most drafting errors in mergers and acquisitions agreements arise from lawyers not focusing on the underlying business aspects of a deal, an attorney said June 9.

“You simply can't draft or negotiate what you don't understand,” said Christopher Harrison, a New York-based partner at Schulte, Roth & Zabel LLP, speaking at a Bloomberg BNA webinar.

According to Harrison, critical drafting skills include understanding the economic issues of the transaction and ensuring clients are not surprised by any of the deal terms. In addition, the agreement should be drafted for the intended business result, he said in slides accompanying his presentation.

Negotiating the Deal 

Harrison noted that there are two main components for negotiating M&A deals. The first is understanding and explaining the economic rationale for how the deal terms work and interrelate, he said. In particular, lawyers must be able to focus on and explain how the terms are impacted and “amplified” by the particular economic circumstances of the transaction.

The second core component is understanding the market, Harrison said. He noted that clients now are more focused on whether a deal term is “market,” i.e., used prevalently in the market. “That has become, in effect, a proxy for the client's perception of what is fair in the circumstances,” he said.

Because of that, knowledge of the market is becoming ever more important, trumping the economic logic of a position, Harrison said. The downside of that is that deal makers increasingly are pushed by the force of precedent into including standardized provisions, he added.

“The average is becoming the norm,” he said. “Unfortunately, a weighted average of deal terms would suit no one.”

Clients' Position 

According to Harrison, explaining clients' position is key to an attorney's negotiation strategy. This requires attorneys to understand the business reasons for that position and how it relates to the facts of the deal.

Asides from market, “reason” typically is the most powerful negotiating tool, he said in slides accompanying his presentation.

Attorneys also should understand why their clients care or should care, because that allows them to exercise judgment so they know when to fight or when to walk away from a point, Harrison said.

In other tips, Harrison said that attorneys will be successful in negotiating M&A deals if they keep in mind the concepts of fairness, reasonableness and consistency.

“Clients want to be reasonable and fair above all,” he said. “That's a driving norm, in particular when you're dealing with clients that want to engage in multiple transactions over time.”

Clients want their dealmakers to appear fair so that the attorneys can “explain the economic rationale that lends credibility to their position and make it appear not merely to be something that could create a windfall benefit,” he said. “They need you to be able to explain what the market is, because that lends credibility to their position as being middle of the road and fair, even if it is something that could be quite favorable to them in the circumstances.”

M&A Terms 

During the webinar, Harrison also discussed different types of key M&A provisions and how they are used, including:

• representations,

• covenants,

• closing conditions and

• material adverse effect clauses.


Among other remarks, he observed that almost all deals—both public and private—have a “bring-down condition” that requires the target's representations to be true at closing. In about two-thirds of the deals, the condition also requires the representations to be true as of signing, he said.

Harrison is an advisory board member of BBNA's Mergers & Acquisitions Law Report and author of “Make the Deal: Negotiating Mergers & Acquisitions,” published by Bloomberg Law.

BBNA and Bloomberg Law are owned by Bloomberg LP.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Ryan Tuck at

An on-demand recording should be available June 12 at /learning.

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