Answers / M&A Advisory

What are the key deal protections in an M&A agreement, and how do they affect the likelihood of a successful closing?

A core M&A Advisory interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.

THE SHORT ANSWER

Key protections: no-shop clause (target cannot solicit other bids), fiduciary out (allows target to consider superior proposals), break fees (reverse break fee if acquirer fails, target break fee if target backs out), matching rights (target can match competing bids), and force-the-vote provisions. These protect the acquirer from being outbid and ensure deal certainty. However, excessive protections may deter competing bids and reduce target value. Balancing protections is critical to get the deal done while maximizing value for the target's shareholders.

WHAT INTERVIEWERS LISTEN FOR

  • ✓No-shop clause
  • ✓Fiduciary out
  • ✓Break fees (reverse and target)
  • ✓Matching rights
  • ✓Force-the-vote provisions

COMMON MISTAKES

  • ✗Confusing break fee with reverse break fee
  • ✗Assuming no-shop is absolute
  • ✗Ignoring fiduciary duties of target board

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