International deal lawyers must regularly decide which country’s governing law and standard form M&A agreement to use in each transaction. Their initial reaction is to select their home country’s law and standard form, but while it may be nerve-wracking to venture outside one’s home jurisdiction, doing so may help businesses mitigate risk and even provide a competitive advantage. This is seen by analysing whether a US or UK standard form should be used, and the same principles that apply to such a decision would apply to a decision between any two countries. Typically, a seller would prefer the UK form and a buyer would prefer the US form for the reasons set forth below. This article explains such preferences by analysing how key provisions are treated in the US and UK, including treatment of representations and warranties, MAC clauses, termination rights, seller disclosures, dispute resolution costs and restrictive covenants.

The opportunity to choose a US or UK form can arise in a variety of situations, such as any party having a parent or subsidiary in either country. While each country has similar legal concepts because of their common law lineage, each country practices law quite differently, and each such practice affords buyers and sellers with a significantly different allocation of risks. For example, US practice has standard documents that vigorously list, explain and allocate the myriad risks involved, whether through representations and warranties that have detailed schedules, numerous closing conditions or clear covenants that must be complied with for the period between signing and closing. UK practice, on the other hand, is quite sparse in such risk identification, explanation and allocation, and typically lacks such provisions entirely or has them in much less significant detail.

Oct-Dec 2014 Issue

Eisner Jaffe