Two recent high-profile M&A transactions highlight the various ways that buyers and sellers can creatively allocate the risk of failure to obtain antitrust approval in their acquisition agreements.

On February 12, 2014, Comcast Corporation agreed to acquire its competitor, Time Warner Cable Inc., in an all-stock transaction valued at $45.2 billion. The parties' merger agreement includes a unique divestiture provision not typically seen in public merger agreements. The negotiated divestiture provision provides that Comcast would:

At the same time, the merger agreement does not provide for any reverse break-up fee to be paid by Comcast in the event of antitrust failure, even though this fee is a common mechanism for negotiating antitrust risk. For more detail about the Comcast/TWC divestiture provision, see Legal Update, Merger Agreement Between Comcast and Time Warner Cable Contains Unique Divestiture Provision. For a complete summary of the terms of the merger agreement, see What's Market, Comcast Corproration/Time Warner Cable Inc. Merger Agreement Summary.

By contrast, the merger agreement for Facebook, Inc.'s acquisition of WhatsApp Inc. does provide for a reverse break-up fee payable by Facebook in the event of antitrust failure. However, this fee is also unique, as it is not structured solely as a cash payment. According to Facebook's disclosure on its Form 8-K, the merger agreement provides for Facebook to pay WhatsApp a fee of $1.0 billion in cash and issue $1.0 billion in shares of Facebook's Class A common stock to WhatsApp in the event of failure to obtain required regulatory approvals. (The merger agreement will be filed as an exhibit to Facebook's quarterly report on Form 10-Q for the quarter ending March 31, 2014.)

This fee is somewhat reminiscent of agreements in the telecom industry in which the buyer agreed to take some action on termination for antitrust failure in addition to or instead of making a cash payment. For example:

However, the Facebook/WhatsApp deal would be the only acquisition agreement in the entire What's Market database to provide for an issuance of shares by the buyer to the target company in the event of antitrust failure.

Practical Law's Corporate & Securities service has several resources to aid in the drafting and negotiation of risk-allocation provisions in M&A agreements. For an overview of the reporting requirements that apply to certain mergers and acquisitions under the Hart-Scott-Rodino (HSR) Act, see Practice Note, Hart-Scott-Rodino Act: Overview. For a discussion of the negotiation of reverse break-up fees for antitrust failure, including links to What's Market summaries of recent public merger agreements, see Practice Note, What's Market: Reverse Break-up Fees for Antitrust Failure. And for an example of an efforts covenant in a seller-friendly stock purchase agreement, with associated drafting notes for buyer's and seller's counsel, see Standard Document, Stock Purchase Agreement (Auction Form): Section 5.09 (Governmental Approvals and Other Third-party Consents).

In addition to these resources, Practical Law's Antitrust service has many more tools for negotiating antitrust issues in M&A transactions. The following resources are available to Corporate & Securities subscribers after registering for a free trial to the Antitrust service:

The two Standard Clauses are also included in the Antitrust Risk-shifting Toolkit, a collection of resources that provide guidance on when to include antitrust risk-shifting provisions in an acquisition agreement and how to structure those provisions. Other resources can be found by browsing Practical Law Antitrust's Merger Control topic page.