Analysis Group Affiliate Edward Rock Opines on Use of Reverse Termination Fees in Delaware Chancery Court
May 6, 2019
Following an earlier ruling in its favor, Rent-A-Center, Inc., informed the Delaware Chancery Court that it had reached a settlement agreement with Vintage Capital Management, LLC. The earlier ruling permitted Rent-A-Center to terminate an agreement to be acquired by Vintage, a private equity firm, upon reaching the “end date” specified in the merger agreement. This action triggered the $126.5 million reverse termination fee included in the contract.
Analysis Group was retained by counsel to Rent-A-Center. Affiliate Edward Rock, the Martin Lipton Professor of Law at NYU School of Law, opined on the use of reverse termination fees, which are fees paid by buyers (rather than sellers) upon termination of an agreement under certain circumstances. Professor Rock opined that the fee in question was appropriate, given the risks involved in the merger. Professor Rock was supported by an Analysis Group team that included Managing Principal Gaurav Jetley, Vice President Lauren Hunt, and Manager Daniel Deisenroth.
The Vice Chancellor hearing the case ruled that the agreement had been rightfully terminated when Vintage missed an extension deadline, but reserved judgment on the disputed termination fee. Subsequently, Vintage agreed to pay Rent-A-Center a $92.5 million settlement amount.