The Efficient Contracting Within M&A

Julius Sander & Mathias Jensen

Student thesis: Master thesis

Abstract

The M&A-market in Denmark thrives. Companies are being bought and sold every day. Despite a booming economy you see up to 70% of all transactions creating bigger problems than benefits. It is therefore highly relevant to examine whether the contractual foundation i strong enough, or if, by implementing strategic contracting, companies are able to achieve a higher revenue than the case is today, based on some proactive changes to the contract that is being used as a standard contract in today’s market. The purpose of strategic contracting is to create a sustainable competitive advantage based on these proactive clauses as you create relational rent between the two companies, cooperating towards the goal of mutual value creation - value that couldn’t be reached without the implementation of strategic contracting. Initially, in the legal analysis, the general legal aspects of mergers and acquisitions is examined to create a basic understanding of what an acquisition is and what legal rules apply. Furthermore, it is determined what the extent of the clauses within fine clauses and competition clauses is and how these are used. These are usually used to risk allocate instead of cooperate, and to threat the counter part into following the contract. Hereafter, pros and cons of dispute settlement clauses is derived. Conclusively, mediation is the least intrusive way of dispute settlement, as this is solved privately, and focuses on working together instead of handing the conflict over to a third party. The economic analysis has its starting point in the PA-theory as well as an economic model developed in compliance with the theory on efficiency. The developed model is used to meassure the efficiency on clauses involving fines, competition clauses and dispute settlement and concludes that the efficiency is relatively high at clauses involving fines and competition clauses and very low at dispute settlements. The interdisciplinary analysis integrates the results found in the legal and the economic analysis. It implements strategic contracting and measures the efficiency level on the new clauses, which has a significantly higher efficiency level. Furthermore it presents specific solutions on how to write the contract.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages143
SupervisorsPeer Schaumburg-Müller