When the circumstances surrounding a merger or acquisition change, depending on the terms, deal parties can terminate the deal, but they may also renegotiate and amend the terms of the transaction. Given a recent high-profile (and for the moment) purportedly terminated takeover, as well as the recent uptick in deal terminations, I wondered (1) how often do deal parties amend their M&A agreements, and (2) when do these amendments happen?
After I reviewed 207 publicly filed amendments to Delaware-governed M&A agreements, the answers appear to be: (1) not exceedingly often; and (2) on average, a matter of months—not years—following the execution of the original agreement.
The 207 amendments reviewed were dated from Jan. 1, 2017 to July 21, 2022, and although some represented a second, third, or fourth amendment to the same M&A agreement, each one was a discrete document and made distinct changes to the M&A agreement it amended.
Prevalence of Amendments
The number of publicly filed amendments—styled as “amended”, “amended and restated”, or “amendments-to"—to M&A agreements governed by Delaware law has decreased over the last five years, according to the data, and 2017 had the highest number of publicly filed amendments in the period covered by my review.
Based on my review, even when numbers of publicly filed amendments were at their highest, amendments—on an annual basis—represent only a fraction of the overall number of publicly filed Delaware-governed M&A agreements. For example, in 2017, there were 53 amendments-to, amended, and amended and restated Delaware-governed M&A agreements, but these represented only about 6% of the more than 950 Delaware-governed M&A agreements that were filed in total (including amended agreements) that year.
Only seven Delaware-governed amendments have been publicly filed so far this year, compared with 19 during the same period in 2021. But there has been an increase in overall deal terminations in recent months, so it is possible that some of this year’s deals currently categorized as terminations may actually result in renegotiated deals with amended deal agreements.
How Amendments Are Made
Deal parties typically amend their M&A agreements by (1) executing a separate amendment to the M&A agreement (“amendments-to”); or (2) amending and restating the M&A agreement in its entirety (“A&R agreements”).
As the number of amendments made to M&A agreements has fallen from 2017 to 2021, so too has the use of “amendments-to” as a means of amending such agreements. And while the use of “amendments-to” decreased, the use of “A&R agreements” increased and became the primary method for amending M&A agreements. In fact, “amendments-to” were the preferred method in 2017, but, according to my search, neither 2021 nor 2022 (to date) have seen publicly filed “amendments-to” used to amend any Delaware-governed M&A agreements.
In “A&R agreements,” the entire M&A agreement is reproduced, amended, and executed by the parties, which can make it more difficult to identify the actual, specific changes in the agreement. Nevertheless, this type of amendment may have become the preferred method because it has the advantage of avoiding the need for deal parties to keep track of multiple documents that, together, constitute the whole agreement.
“Amendments-to” house their amendments in a separate document, but they do clearly identify which sections and subsections of the M&A agreement are being changed.
Timing of Amendments
The timing and nature of the 207 amendments to the Delaware-governed M&A agreements I reviewed illustrate that deal parties amended their M&A agreements at any time and as many times as needed (as evidenced by amendments titled, for example, “Amendment No. 4 to” an M&A agreement), so long as they amended the agreement in accordance with its terms. The time between the date of an original M&A agreement and the date of an amendment also varied widely.
The amount of time that passed between the original M&A agreement date and the date of the amendment in the 207 amendments reviewed ranged from zero days (the original agreement and amendment were dated the same day) all the way to 1,251 days, which is a little over three years.
That being said, the average number of days between the original M&A agreement date and the amendment date among the 207 amendments reviewed was 143 days (between 4 and 5 months, approximately).
I also reviewed a smaller subset of 35 amendments to Delaware-governed M&A agreements dated between Feb. 9, 2017 and July 29, 2021, where the deal was valued at $1 billion or greater. The average time between the date of the original billion-dollar M&A agreement and the amendment date was the same as those from the larger sample, with an average of 143 days between the date of the original agreement and the date of the amendment.
If we apply this average of 143 days, then a hypothetical future amendment to the April 25 agreement between Twitter Inc. and Elon Musk would fall around September 15, 2022, just before the Delaware Court of Chancery trial is set to begin in October.
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