Risk Allocation Mechanisms in Merger and Acquisition Agreements

Authors

• Ott Aava

Keywords:

M&A, delayed enforcement of acquisition agreement, MAC clause, termination fee, price adjustment mechanism

Abstract

This article serves as an overview to provide basic knowledge for people previously unacquainted with the field of mergers and acquisitions and the risks of parties involved in M&A agreements. The article provides a thorough review of the risks the parties are exposed to in the time period between signing and closing the transaction and proposes three ways to effectively allocate these risks between the parties, namely Material Adverse Change (MAC) clauses, termination fees and price adjustment mechanisms.