Financing Contingencies in Merger Agreements: Negotiating Buyer Reps, Target Covenants, and Commitment Letters
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Commercial Law
- event Date
Wednesday, November 20, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will analyze buyer reps and warranties, target company covenants to cooperate, and other terms typically included in M&A agreements to address financing contingencies. The panel will also discuss the negotiation and drafting of the financing commitment between the buyer and its lender and how the commitment is reflected in the merger agreement.
Ms. Campana represents a wide variety of direct and alternative lenders, particularly those involving private sources of capital, including private debt funds, hedge funds, specialty finance companies, business development companies, private equity investors, and issuers in domestic and cross-border financings across the capital structure in connection with acquisitions, leveraged buyouts, convertible debt, equity investments, letters of credit, and project financings. Ms. Campana is a frequent author and lecturer on finance issues.
Ms. Weinstein regularly advises financial institutions in connection with structuring and documenting financing transactions. She has extensive experience representing first and second lien lenders, mezzanine lenders, and equity sponsors and borrowers in a diverse range of debt financings. Her area of focus includes acquisition, recapitalization and other leveraged financings, cash flow and asset-based financings, first lien, second lien, mezzanine and unitranche financings (including first-out, last-out financings), debtor-in-possession and exit financings, and workouts, restructurings, and bankruptcies.
Financing conditions are critical in a merger transaction, providing assurances to the target that the buyer has sufficient funds to close and assurances to the buyer that the target will cooperate as needed to close the financing. The financing commitment is a critical component in the transaction and figures heavily in negotiating and drafting those provisions.
Since the buyer faces potential liability if it fails to close, counsel must seek certainty in drafting the financing commitment. The commitment letter should be precisely worded and contain a detailed list of all material conditions and expressly state that they are the only conditions to close. If the financing involves multiple lenders, intercreditor terms may need to be negotiated as well.
Care must be taken in drafting buyer financing representations in the merger agreement. These representations will typically relate to the enforceability of the commitment, the financing conditions, and the adequacy of loan proceeds to close.
Successful financing will depend on the cooperation of the target in loan closing. The cooperation covenant is often heavily negotiated, balancing the target's interest in minimizing the amount and type of information provided against the lender's need to conduct adequate due diligence.
Listen as our authoritative panel discusses these and other concerns about financing commitments and related provisions in merger agreements.
- Financing commitment letters
- Loan terms that should be included in the commitment
- Conditions precedent
- Confirming sufficiency of funds
- Financing conditions in merger agreements
- Buyer reps and warranties
- Target covenants
- Bridge financing and related representations
The panel will review these and other critical questions:
- Why is specificity in M&A financing commitments so important in contrast to other commercial financing transactions?
- What kind of input might the target have in negotiating a financing commitment?
- To what extent are buyer financing reps and warranties affected by the financing commitment?
- What does the lender typically require in its due diligence of the target, and how is that reflected in the commitment and the merger agreement?
