In M&A, as long as nothing is signed, everyone remains free. Free to commit, free to back down, free to disappear, this contractual freedom is a pillar of French law, but it is not absolute. With the progress of the discussions, it gradually slides towards an area where certain decisions cease to be trivial. If the law does not sanction a rupture in itself, it sanctions a rupture at the wrong timeand above all a rupture which contradicts the attitude adopted until now.
Case law calls this a “brutal termination of talks”. In recent cases, this is not a theoretical concept, the judges are interested in the chronology of the exchanges, in the way in which one party maintained the idea that the closing was no more than a formality, and in the way in which it chose, or not, to assume a change of intention. The freedom to break up is real, but the way of breaking up potentially engages one’s responsibility.
What moves a case from simple withdrawal to fault rarely has to do with a contractual clause. Whether an LAW exists or not, whether an NDA has been signed, whether an NBO has been sent, the analysis remains the same: the courts mainly scrutinize behavior. They assess the degree of legitimate trust created during the negotiation, the depth of the due diligence already carried out, the imminence of closing and the financial impact of late withdrawal. The more steps have been taken, the sooner and more clearly the reversal must be assumed.
In practice, the sanction is proportionate; a buyer or seller found to be at fault is never ordered to pay the expected profit from the deal. On the other hand, he may have to reimburse all the costs incurred by his interlocutor: M&A bank, lawyers, audits, experts, and, in certain cases, specific operational costs mobilized for the preparation of the operation. Please note the amounts are rarely symbolic, as soon as the process is advanced, the amounts quickly reach several hundred thousand euros. And the procedure can last for years.
The cases that end up before the courts often follow an identical pattern. One party harbors a serious doubt, often related to financing, a change in internal priorities or a sudden deterioration in the market, but chooses not to express it. Discussions continue, meetings follow one another, documents circulate, mobilizing the teams. Then, at the moment when the other party considers that everything is converging towards the signature, the break falls suddenly based on a secondary reason or on a maintained ambiguity. It is exactly this type of sequence that case law qualifies as wrongful.
What is striking in the analysis of disputes is the marginal place occupied by pre-contractual documents. The LAW is not a commitment, the NDA is difficult to enforce, and an NBO has no binding scope, however leaders often attribute to them an important psychological significance when the law only sees procedural markers. Most often it is the acts, and not the texts, which dictate the outcome of a dispute.
For M&A players, the challenge is therefore not to protect themselves with formulas, but to correctly manage the moment of withdrawal. When doubt arises, it must be expressed, when the intention evolves, it must be explained and when the outcome becomes uncertain, the other party must be warned. A simple signal, given early enough, is often enough to avoid a conflict. Conversely, the temptation to wait for “one more meeting”, “one more clarification”, or “one more document” creates the ideal conditions for litigation.
In deals where everything moves quickly, where several avenues are engaged simultaneously, and where internal decisions move according to the market, knowing how to break up properly becomes a skill in its own right. It is a reflex of discipline, essential to prevent the freedom to negotiate from transforming into a legal risk.
And if a sudden breakup remains a relatively rare dispute, it is always costly because it mobilizes managers, freezes relationships, alters reputations and freezes an asset in a gray zone for years.
When you engage in an M&A process, whether you are the buyer or the seller, keep in mind that everything can stop, but not just any way. The law is not interested in your intentions. It looks at your behavior, the chronology of the exchanges, and the trust that you yourself have created.
