Definitive Agreement
Definition
The definitive agreement is the binding contract that governs an M&A transaction — a merger agreement in public deals, or a stock/asset purchase agreement in private deals. Signing it is the moment a deal is legally "agreed," though closing usually follows weeks or months later once conditions are satisfied.
Key components: price and consideration; representations and warranties about the business; covenants governing conduct between signing and closing (including no-shop provisions); closing conditions (shareholder approval, antitrust/regulatory clearance, no material adverse effect); termination rights and fees (breakup and reverse breakup fees); and, in private deals, indemnification and purchase price adjustment mechanics.
The gap between signing and closing creates risk allocation questions — who bears the risk of a business downturn (the MAE definition), financing failure (reverse termination fee, specific performance), or regulatory block (efforts covenants, ticking fees).
Why interviewers ask
Interviewers may ask what happens between signing and closing, what a MAC/MAE clause is, or what protects each side if the other walks. Knowing the anatomy of a merger agreement at a headline level distinguishes candidates who follow real deals.
Related terms
Interviews don't test definitions — they test recall under pressure.
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