Page 371 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

Steve Glover: I agree as well. Before 2000, sellers were willing to take the bet that
getting a fixed number of shares (in a fixed exchange ratio deal) would be okay because,
if anything, the acquirer’s stock price was going to go up between signing and closing.
That’s just not a bet that sellers are willing to take anymore. I’ve been seeing more collars
than price-based walk rights, but there’s been some of the latter as well.

Climan: Yes, and in those cases where the acquirer ultimately agrees to a price-
based walk right, the acquirer often insists on several refinements to that structure for its
own protection.

For example, an acquirer acceding to the target’s request for a price-based walk
right may insist on some sort of symmetry. The acquirer will argue that, if the target
company gets a walk right when the acquirer’s stock price falls below some level, then
the acquirer ought to have a corresponding walk right if its stock price rises above a
certain level. In other words, if the value of the stock the acquirer is issuing in the deal
goes up significantly before the closing, then the acquirer ought to have the flexibility to
walk away from the deal.

Of course, as a practical matter, an acquirer might not be eager to exercise that
walk right, because it may well have been the market’s positive reaction to the
announcement of the deal that led the acquirer’s stock price to move up in the first place.
Under these circumstances, if the acquirer exercises its walk right, it may see its stock
price fall right back down to pre-announcement levels.

A second protection that an acquirer may demand where the target has
negotiated a price-based walk right is a "double trigger" for that walk right. The "double
trigger" formulation is essentially intended to prevent the target from calling off the deal
where a decline in the acquirer’s stock price is attributable to a general market downturn.

If a "double trigger" formulation is used, a decline in the acquirer’s stock price
below the pre-agreed dollar threshold would not be sufficient by itself to trigger the
target’s walk right. That would be only one of two separate trigger conditions that both
need to be satisfied in order for the target company to be able to kill the deal. The second
trigger entails a comparison between the percentage decline in the acquirer’s stock price
and the percentage decline in the average of the stock prices of a specified basket of
comparable companies in the acquirer’s "peer group.” The second trigger is tripped only
if the decline in the acquirer’s stock price is significantly — say 20% — greater than the
decline in the peer group index price.

A third protection that an acquirer may insist upon when it agrees in concept to
give the target a price-based walk right is what we refer to as "top-up" or "kill or fill"
rights. These rights enable the acquirer to prevent the target company from walking away

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