Specific performance involves the obligation of the acquirer to complete the proposed transaction under a predefined set of circumstances. It is a pre-closing termination remedy pursuant to which a seller (in the case of mergers & acquisitions, the target firm) can force a buyer to close. Should deal negotiations turn sour, traders will do well to be aware of what has already been specified under the terms of specific performance.
Enacting The Right
A DEFA14A filing by Forescout Technologies (FSCT) on February 2, 2020 shows an example of how specific performance is worded in the Merger Agreement. The trader can clearly see how the acquirer (parent) will be subjected to consummate of the deal.
Enforcement. Parent and Merger Sub will seek to enforce, including by bringing a Legal Proceeding for specific performance, the Equity Commitment Letter if the Company seeks and is granted a decree of specific performance of the obligation to consummate the Merger after all conditions to the granting thereof set forth in Section 9.10(b) have been satisfied. Except as provided in the preceding sentence, neither Parent nor Merger Sub will be under any obligation, and nothing in this Agreement (including this Section 6.5(e)) will otherwise require Parent or Merger Sub, to (i) bring any enforcement action against any source of Equity Financing to enforce its rights pursuant to the Equity Commitment Letter; or (ii) seek the Equity Financing from any source other than a counterparty to, or in any amount in excess of that contemplated by, the Equity Commitment Letter.
Although this is an important legal point the issue is rarely invoked. Should a deal be in such jeopardy that the situation has reached this point, it is most likely that traders involved in such a situation will be well versed in the legal complications of corporate law.
