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Abstract: 

In today’s deal-making environment the availability and certainty of financing is often a key component of entering into an acquisition transaction. There are significant factors lenders and buyers should consider in negotiating the closing conditions in a commitment letter to finance an acquisition transaction. In a transaction where the buyer’s obligation to close is not conditioned on the receipt of financing, the buyer will be taking the risk of the financing being unavailable. Typically, a buyer will want to have as few differences as possible between its obligation to its seller and its lender’s obligations under the commitment letter. However, the lender may not be willing to take the same risk as the buyer on being obligated to close. For both parties the details are intricate—and lack of attention to them can lead to a buyer or lender taking on risks it did not intend to accept or did not fully appreciate.

Keywords: certainty; risk; due diligence; syndication; market flex

Affiliations:  1: Paul, Weiss, Rifkind, Wharton & Garrison LLP.