Merger Agreement
The definitive legal contract between an acquirer and a target company specifying the full terms and conditions of a proposed merger.
What is Merger Agreement?
A merger agreement (also called a definitive agreement or acquisition agreement) is the binding legal contract entered into by an acquiring company and a target company that governs all aspects of a proposed merger or acquisition. Key provisions include the consideration structure (cash, stock, or combination), representations and warranties from both parties, conditions precedent to closing (regulatory approvals, shareholder votes, financing conditions), covenants governing business conduct before closing, termination rights specifying when either party may walk away, and break-up fees or reverse termination fees payable if the deal collapses. The agreement is negotiated by legal and financial advisors for both sides, typically filed as an exhibit to an SEC Form 8-K within four business days of signing.
Example
The Merger Agreement between Microsoft Corporation and Activision Blizzard, Inc., signed January 18, 2022, specified an all-cash consideration of $95.00 per share, representing a total equity value of approximately $68.7 billion. The agreement included a $3.0 billion reverse termination fee payable by Microsoft to Activision if the deal failed to close due to regulatory causes, and a $2.27 billion termination fee payable by Activision if its board changed its recommendation. The agreement and all exhibits were filed with the SEC within four business days of signing.