Oops, we forgot

As we learn from Fed e-mails that were released and printed by the WSJ, here is one I got via the Big Picture that I find especially interesting:

“I think the threat to use the MAC is a bargaining chip, and we do not see it as a very likely scenario at all. Nevertheless, we need some analyses of that scenario so that we can explain to BAC with some confidence why we think it would be a foolish move and why regulators would not condone it.”

–Dec. 21 email from Chairman Bernanke to some Fed officials

What is an MAC in this context, please? It turns out that it is a legal term often used in contracts, especially those being used M&A (Mergers & Acquistions).
As answer.com explains:

The rationale for such a clause is a means to protect the acquirer from major changes that make the target less attractive as a purchase. Large transactions often require a long period of time between actual agreement and the completion of the transaction (the “closing”). This time is used to obtain governmental or regulatory approvals (e.g., in the United States, Hart-Scott-Rodino Antitrust Improvements Act approval), to obtain shareholder or labor consents, and any other required third-party consents. During this period, the target continues to function pending the completion of the merger, and is subject to the normal risks of its business, the economy or acts beyond its control.

Now, since these lawyers think of everything in those cases, why then are such clauses not in the contracts with executives? If they had been, that would have allowed the companies to refuse to pay any bonus whatsoever.

One one hand those people think of everything, and on the other hand they forget to put the most basic safeguards into their contracts. Tsk, tsk.

Fiat-Chrysler Deal Complete

Just when everyone thought the Fiat Chryser thing is a done deal, we read this in the Italian newspaper Il Messaggero:

If there is no agreement until June 15, then Fiat no longer considers itself to be bound by Memorandum of Understanding (MoU) with Chrysler, wrote the Turin carmaker in a note to the Supreme Court. Fiat wrote, “the fundamental point that the pension funds ignore is that if the transaction is not completed until June 15 2009, it will terminate under it’s terms.

Fiat’s brief submitted to the Supreme Court is here.

Turns out that this article is from before the Supreme Court had denied the stay on June 9.
So the merger can complete now, one would think, but is the deadline of June 15, 2009 still in force and are there dangers that the deal could still fall flat? No, we read in the same article from Il Messagero:

Fiat does not have any intention to abandon the agreement with Chrysler, not even after June 15 has passed, said Sergio Marchionne, this morning on Bloomberg, answering some questions about the temporary stay that blocked the sale of the American carmaker to Fiat. “We have to be patient – elaborated the Italo-Canadian manager – and work agree to that system of doing business. We will never abandon this process with Chrysler.”

The said agreement was concluded on June 10, 2009 placing Sergio Marchionne as chairman on the board and Robert Kidder as CEO, according to La Repubblica.