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Contract Assignment in M&A Transactions

Bloomberg BNA Corporate Law & Accountability Report
March 14, 2016, Ryan M. Murphy

Given the pace of M&A transactions and the abundance of issues to be negotiated, there is a danger that transferability of third-party contracts (i.e., the need for consent and obtaining the same) can be lost in the shuffle. The deal complications associated with assignment of contracts—including delays in closing and a third party extracting concessions as a quid pro quo for consent—can erode transaction value. As such, it is incumbent upon deal counsel to identify potential hurdles to assignment and develop a strategy to avoid these potential impediments to closing. This article focuses on the intersection of Delaware law with contract assignment, namely the default rules for transferability as well as guidance on interpreting nonassignment clauses commonly confronted in the M&A context. In addition, practical considerations are offered to develop a strategy to manage the contract assignment process.

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