Abstract
The Delaware Chancery Court recently restricted a merger target's ability to recover damages on behalf of its shareholders from a breaching buyer. This paper investigates the impact of the decision. First, we present a theoretical analysis to generate empirical predictions. Second, we show that the decision led to a decrease in the firm value of targets in mergers governed by Delaware law. Third, we hand-collect relevant provisions from merger agreements and find that the agreements governed by Delaware law increasingly include target-friendly non-price terms after the decision. We also present evidence suggesting deal price responds to the inclusion of novel non-price terms. Overall, the paper demonstrates how remedy provisions play an important role in merger transactions and how contracting parties respond to an exogenous change in deals jurisprudence.
Disciplines
Commercial Law | Contracts | Corporate Finance
Date of this Version
6-30-2024
Working Paper Citation
Aggarwal, Dhruv; Choi, Albert H.; and Min, Geeyoung, "Contractual Remedies in Mergers: Lessons from Crispo v. Musk" (2024). Law & Economics Working Papers. 272.
https://repository.law.umich.edu/law_econ_current/272
Included in
Commercial Law Commons, Contracts Commons, Corporate Finance Commons
Comments
© Dhruv Aggarwal, Albert H. Choi and Geeyoung Min 2024. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
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https://ecgi.global/content/working-papers Contractual Remedies in Mergers: Lessons from Crispo v. Musk Electronic copy