Walk away right
M&A / Merger ModelA target board's right to terminate a share deal if the acquirer's shares fall below a stated level before completion, unless the acquirer tops up the consideration.
Also written: walk away provision
It is usually drafted as a double test: the acquirer's shares must fall below an absolute level and must also underperform a named index by a stated margin, measured over a defined period before completion. The second limb matters, because a board is trying to protect against something going wrong at the acquirer rather than against a general market fall that has hit both companies.
The acquirer normally keeps a top up option. It can preserve the deal by increasing the ratio or adding cash to restore the agreed value, which turns the right into a negotiation rather than an automatic termination.
The distinction from a collar is worth holding. A collar reshapes what the target receives. A walk away right changes whether the transaction happens, which is a different kind of threat and is priced as one by both sides and by the arbitrage community watching the spread.
It sits alongside the other termination provisions in the agreement rather than replacing them, and it is a separate thing from a material adverse change clause, which is about the target's business rather than the acquirer's share price.
Worked example
A merger agreement lets the target terminate if the acquirer's shares fall more than 20% from the reference price and also underperform a sector index by more than 15% over a stated measurement period.
A broad market fall that takes both companies down together fails the second limb, so the right is not triggered.
A fall driven by a profit warning at the acquirer alone triggers both limbs, and the acquirer must either improve the terms or lose the deal.