M&A Drafting: The Redundant Reference-Point Exception in the Bringdown Condition

I’ve been working on an article on the word material, so that sent me back to my book The Structure of M&A Contracts. The book is due for an update, so I’d like to do a second edition sometime, one that makes it easier for people to buy the book! But I’ll use this post to revisit one point I was reminded of today—that it’s redundant to include a reference-point exception in the bringdown condition.

A what exception? A reference-point exception. If you provide a reference point for a statement of fact, that means you have the statement of fact speak as to accuracy of those one or more facts only at a point in time stated in the statement of fact. For example, Schedule A lists all litigation to which Acme was party on 15 February 2022. For more about reference points, see this 2011 blog post. (But beware—in those unenlightened days I used *shudder* represents instead of states and representation instead of statement of fact.)

The exception? Here’s the bringdown condition in the merger agreement providing for Microsoft’s acquisition of Activision Blizzard; the reference-point exception is highlighted:

The reference-point exception misconstrues the role of a reference point: including a reference point in a statement of fact doesn’t alter that accuracy of that statement of fact (along with all other statements of fact) is determined (usually) when the contract is signed and at closing. The reference-point exception is redundant, so it clogs up the works and might create confusion.

I came up with the term reference point. It’s a useful term—if you don’t give a name to a phenomenon, you’re unlikely to be aware of its implications.

There’s plenty else worth discussing in the bringdown condition, but that will have to wait. The first installment will be my article on material.

Categories M&A

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

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