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Heightened risk of antitrust and foreign investment intervention met with robust deal provisions

With merger control and foreign investment intervention levels rising, allocating execution risk in deal documents was a priority for merging parties. The number of our transactions conditional on antitrust and foreign investment approvals remained steady and deal protections continued to be heavily negotiated.

Antitrust and foreign investment conditions a mainstay

Our research on global private M&A deals1 showed that while sellers remained focused on execution risk, overall there were slightly fewer conditional deals in 2023.

However, the proportion of our transactions subject to antitrust (ie merger control) approval conditions stayed in line with previous years, at 42%. Nearly a quarter of deals contained foreign investment approval conditions, an increase of 33% since 2021 and more than double what we saw in 2020.

This reflects the heightened risk of merger control and foreign investment intervention. Looking ahead, as the number of mandatory filing regimes keeps growing and regulators look set to maintain an aggressive approach to enforcement, we expect to continue to see a high percentage of deals containing these conditions.

Deal protections heavily negotiated

Only 21% of our private M&A deals in 2023 which contained one or more antitrust conditions included a “hell or high water” (HOHW) commitment. This is an obligation that compels the buyer to do everything in its power to secure merger control clearance. This, as in 2022, is relatively low, and represents a more than 50% drop from 2021.

There are several possible reasons.

First, the persistence of a soft M&A market, favouring buyers in commercial negotiations. Reflecting this, we saw an increase in other types of more limited buyer obligations. 23% of our transactions included limited divestment obligations, requiring the buyer to sell businesses if required, but not above a certain threshold. This was up from 17% in 2022. In a further 35% of deals (compared to 28% the previous year), buyers committed to using reasonable or best endeavours to obtain relevant clearances.

Second, buyers may be unwilling to give HOHW commitments on the basis that the increasingly unpredictable nature of authorities’ concerns (or the remedies needed to address them) could require them to make unforeseeable and far-reaching concessions.

Third, antitrust authorities continued to be sceptical about whether remedies can effectively address antitrust concerns. HOHW provisions are unlikely to be fruitful where an authority simply refuses to approve a deal. Sellers may therefore see less value in pushing for one (and instead may prefer, eg, a reverse break fee).

Use of reverse break fees continues to grow

Sellers continued to demand reverse break fees – a useful protection should an antitrust authority or foreign investment regulator intervene to block a transaction.

In 2023, 13% of our conditional private M&A deals contained a reverse break fee. This is up from only 8% two years ago.

The average break fee on our deals was 5% of enterprise value. This is in line with what we have seen more generally in the market for deals facing antitrust headwinds:

  • Booking was obliged to pay a USD90 million fee to eTraveli (5% of deal value) after the European Commission blocked its acquisition.
  • Adobe is on the hook for a USD1 billion fee (5% of deal value) in relation to its acquisition of Figma after the parties terminated their deal following EU and UK antitrust objections.

This is notably higher than in 2022, where the average break fee on our deals was 2% of enterprise value. Sellers are seeking greater compensation to reflect the potential for higher execution risk, longer and more burdensome review processes and increased uncertainty.

In fact, in some cases in the market, the fee was even higher than 5%. It was 6.5% of deal value (USD353m) in Intel/Tower, payable when Intel abandoned the semiconductor transaction due to antitrust concerns in China. The fee payable by Amazon after the termination of its acquisition of iRobot in early 2024 reached 6.7% (USD94m). 

Increase in conditional deals to come?

The number of deals subject to regulatory conditions will likely increase further in the coming year.

Merging parties are grappling with how to provide for the growing risk that authorities will review – and potentially intervene in – transactions falling below merger control or other filing thresholds. Where a risk is identified, deal conditions should be included. 

The new EU Foreign Subsidies Regulation (FSR) also creates an additional layer of complexity when designing and negotiating deal provisions, particularly given the infancy of the regime.

We expect to see FSR conditions and related protections increasingly in transaction documents. The level of those protections will vary depending on the likely strength and nature of the foreign subsidy concerns. However, as with merger control and foreign investment reviews, the unpredictability of the EC’s concerns under the FSR and how these can be addressed will likely result in buyers pushing back hard on HOHW or similar provisions.


1. Global trends in private M&A – research based on over 1,850 M&A deals on which A&O has acted. Please get in touch with your usual A&O contact if you would like to learn more about the results.

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