HOHW
Provisions
WHAT MUST BE DONE
TO OBTAIN REGULATORY CLEARANCES
SUMMARY
A hell-or-high-water provision is a pre-closing covenant relating to regulatory approvals. It most frequently arises in the antitrust context, but may come up where other regulatory regimes—like foreign investments in domestic businesses (e.g., CFIUS)—are at issue.
EFFORTS STANDARD
In its foundational form, a HOHW clause requires one or more parties, usually on the buy-side, to take any and all actions necessary to obtain the designated regulatory approvals. It would include, for example, selling assets, exiting investments, and defending against government litigation challenging a transaction, at any cost.
IN PRACTICE
HOHW clauses are most often sought by sellers running competitive auctions, and prospective buyers may agree to them, with or without modifications, depending on their respective risk tolerance, institutional policies, and broader investment portfolios.
For example, buyers may agree to accept the clause in principle, but insist on materiality qualifiers (to prevent wholesale portfolio losses) and specificity about which acquisition vehicles the clause applies to (where, in particular, partnerships with co-investors exist).
Jonathan Conigliari is a mergers and acquisitions attorney and the founder of Conigliari PC. He advises a variety of clients on strategic transactions, significant investments, and general counsel matters involving corporate law, special situations, and contracts. You can contact him via email or at +1 310-708-4881.
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