ETE-Williams heightens focus on deal certainty

In response to the Delaware Court of Chancery's decision in Energy Transfer Equity v. Williams (June 24, 2016), merger parties likely will intensify their focus on deal certainty Although a number of unusual characteristics of the ETE-Williams transaction led to both the issue in the case and the judicial result, ETE highlights that merger parties should understand and seek to redress the risks of (and detriment from) non-satisfaction of closing conditions. [...]a target company may seek: * to provide that the only bases on which the parties would not be obligated to close would be that legally required approvals are not obtained; or that the other party willfully breached its covenants set forth in the merger agreement, with a material adverse effect; * larger termination fees than in the past-more akin to the type of termination fees seen in regulatory-sensitive deals-and/or that the termination fee would be payable if the transaction is terminated for any reason other than failure of a short list of specified conditions (we note, though, that if termination is in favor of a competing bid, then, generally, a usual termination fee should be applicable); and/or * direct payment by a topping bidder of any breakup fee that the target may have to pay in connection with a transaction that the target will be terminating to accept the topping bid (so that, even if the topping transaction does not ultimately close for any reason, the termination fee payable by the target with respect to the abandoned transaction would have been paid by the topping bidder).