Series 79 practice questionmediumDeal Protections
A 'matching right' provision in a merger agreement gives the original acquirer:
- AThe right to acquire a majority stake in the target before closing
- BThe ability to reduce the purchase price if the target's earnings decline
- CThe right to veto any changes to the target's business operations
- DThe opportunity to match or exceed any competing bid before the target can terminate the agreement✓ Correct answer
Explanation
Why D — The opportunity to match or exceed any competing bid before the target can terminate the agreement
A matching right (also called a right to match or top) gives the original acquirer notice of any superior competing proposal and a specified period (typically 3-5 business days) to match or exceed the competing offer before the target can terminate the agreement. This provision works in tandem with no-shop clauses and break-up fees to protect the acquirer's position. It creates an advantage for the initial bidder because it can selectively match only offers it considers worth competing against.
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