M&A Deals Are Thriving Because Lawyers Are Modernizing Contracts

When regulatory delays, tariff swings, tax shifts, and geopolitical shocks make timelines and pricing unpredictable, the mergers and acquisitions market isn’t pausing. It’s drafting. In deal after deal, contractual engineering is accelerating.

This overhaul is taking place against a backdrop of global M&A volumes rebounding after a recent slowdown. Rising prices and volatile capital markets should theoretically put the brake on deal flow. Instead, transactions are moving forward because lawyers and creditors are re-engineering the documents themselves. The contracts that underpin acquisitions and financings have become the frontline tools for managing uncertainty.

Five types of terms are now spreading, each designed to keep deals alive despite macro volatility.

Regulatory Uncertainty

Regulatory reviews can stretch for months, sometimes more than a year. Delays introduce serious financing problems for buyers: Committed debt expires, and lenders can change their minds. That uncertainty often forces borrowers to renegotiate under less favorable terms, or lose the financing altogether.

The “applicable margin election” is a new fix. If a deal stretches past the outside date—the point when lenders can exit—the borrower begins paying interest as if the loan has closed. In return, the lender keeps the financing committed. The loan stays live, and both sides avoid last-minute renegotiations.

This structure first appeared in Diamondback Energy’s $4.1 billion acquisition of Double Eagle, and in Viper Energy’s $4.1 billion acquisition of Sitio Royalties Corp.

The fact that two high-profile energy transactions adopted it in quick succession suggests this isn’t a one-off workaround.

This structure changes risk allocation. Borrowers pay a premium to keep financing certain, while lenders are compensated for tying up capital longer. In volatile sectors such as energy, health care, or tech, it could become standard.

Buyers are protected against a future in which financing terms change before acquisitions close. Lenders may lose a bargaining chip in the future, but get the benefit of their original financing bargain.

Liquid Uncertainty

When the macro environment turns hinky, creditors go on defense. Over the past 18 months, terms once confined to distressed situations have become mainstream, and the defensive weaponry looks something like this:

• J.Crew blockers, which prevent borrowers from shifting prized assets beyond lenders’ reach, now appear in 38% of high-yield credit deals.
• Anti-PetSmart terms, responding to a 2018 maneuver in which the company transferred its Chewy stake to a subsidiary outside of its creditors’ reach, now appear in 25% of high-yield credit deals.
• Serta protections, guarding against “uptiering,” are now included in more than 60% of high-yield credit transactions.

Once rare, these protections are now routine. Investors are willing to extend capital, but they’re demanding tighter guardrails. For borrowers, that means higher costs and less room to maneuver.

Tariff Uncertainty

Tariffs have become one of the hardest risks for dealmakers to allocate. Policy changes overnight, costs ripple through supply chains, and borrowers often have limited ability to pass those costs along. For lenders, that creates exposure tied to government actions rather than business performance.

This summer, Superior Industries’ lenders broke new ground by including the first known tariff-triggered event of default in public markets. The term states that if US tariffs on its Mexico-based production rise above 20% and the company can’t pass those costs to customers within 60 days, the loan automatically defaults.

Other deals are taking a different tack. Roughly 5% of public M&A agreements this year have carved tariffs out of the definition of “Material Adverse Effect,” meaning buyers can’t use tariff swings as a pretext to walk away from a signed deal. Even if tariffs escalate sharply, the transaction must move forward.

These changes show how dealmakers are managing trade uncertainty. One tool protects lenders by making tariffs a default trigger. The other protects sellers by limiting buyers’ ability to exit. The common theme is that neither side is waiting to see how policy develops—they’re pre-allocating tariff risk at the contract stage.

Tax Uncertainty

In April, Section 899 of the Republicans’ tax package proposed a major change in how cross-border lending is taxed. Under the draft, US borrowers would have faced higher withholding taxes on interest paid to lenders based in “discriminatory tax jurisdictions” such as France, Germany, the UK, and Japan—where many of the biggest players in the US syndicated loan market are headquartered.

Rather than waiting to see if the draft bill was enacted, the market moved. Seven public credit deals amended their tax provisions to explicitly push those costs onto lenders. In each case, the borrower rewrote the definition of “Excluded Taxes” to ensure any Section 899 exposure stayed with the lender.

Why? Because if that tax burden weren’t clearly assigned, it could blow a hole in deal economics or tank the transaction entirely. Lenders could walk or reprice the deal post-signing.

Congress scrapped Section 899 before the bill was passed, but the rapid inclusion of the risk allocation in credit deals before the final legislation is evidence contractual deal terms are outpacing policy.

Geopolitical Uncertainty

“Acts of war or terrorism” has been a standard MAE carve-out since 9/11. The intent was to keep deals intact even if conflict disrupted the backdrop. What’s changing is the move from generic to specific drafting.

Russia and Ukraine are being carved out of MAE clauses in about 5% of public M&A deals since 2022. Covenants are moving toward a “sanctions-ready” approach that keeps deals executable even if restrictions expand.

The goal is to preserve closing certainty, even if headlines worsen, payment rails jam, or supply chains reroute.

The Broader Pattern

Today’s lawyers, creditors, and financial sponsors aren’t letting external pressures disrupt their deals. Despite the chaos, money moves—and the terms are evolving to keep up.

The macro environment has been hostile to dealmaking, and it isn’t letting up. Thankfully, the response has been more invention instead of more caution.

The common thread is speed. Negotiating off precedent from 18 months ago doesn’t work. Market terms evolve too quickly, and the edge belongs to the parties who see those changes earliest.

Policy outcomes may remain unpredictable, but the contracts themselves are becoming more precise, adaptive, and data-driven. That’s why deal flow continues, even in an environment defined by uncertainty.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Dan Wertman is the co-founder and CEO of Noetica, an AI platform used by top US law firms to benchmark risk in corporate credit and M&A deals.

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