I Have Read Four Hundred Merger Agreements. This One Is A Marriage.

LONDON, United Kingdom — Clause 14 of a marriage settlement made in September 1971 says that if the marriage is dissolved within twenty-five years, otherwise than by the death of a party, the withdrawing house pays the other sixty-two thousand five hundred pounds, index-linked.

The marriage was dissolved in 1993, in its twenty-second year. The other house sued on clause 14. It won four hundred and eighty-nine thousand pounds and its costs, and the judgment is reported at [1994] 2 F.L.R. 611, in a series every family practitioner owns.

That is a break fee. Not like a break fee. It is one — the same instrument, drafted for the same reason, enforced by the same courts.

I read merger agreements for a living from 1999 to 2006. Four hundred or so, at a guess, and the shape of one is not something you unlearn. When the Vayne-Marlbrook settlement reached my desk in May I did not think it resembled a deal document. I thought somebody had retyped one and changed the nouns.

The five instruments

An acquisition agreement has a small number of moving parts and they are always the same parts.

A contribution schedule, saying what each side brings. An earn-out, paying more later if conditions are met. A non-compete, stopping the incoming party doing the same thing elsewhere. A break fee, payable if it comes apart. A claw-back, unwinding everything on a defined failure.

Schedule 1 of the 1971 instrument is the contribution schedule: £1.2m and 3,100 acres in Northumberland from the Vayne-Marlbrooks; from Casa Anselmi-Vrede, the shares in a Trieste holding company and a reversionary interest in Suffolk.

Clause 6 is the earn-out. It is a covenant to resettle further capital when the issue of the marriage attain their majority — a further payment, conditional on performance, promised to people who did not exist on the day it was promised.

Clause 11 is the non-compete, and it has a schedule.

Clause 14 is the break fee. Clause 19 is the claw-back: on failure of issue, the settled property reverts and the whole transaction unwinds.

The parties were nineteen and twenty-two, and the court file records that they had met four times.

We took the names out and asked a stranger

This is where pattern-matching stops and evidence starts.

We took the 1971 instrument, removed the names and dates and the words marriage, spouse, husband, wife and issue, and sent it to a corporate finance partner at a London firm who had no idea what she was holding. One question: what is this document?

Her answer, entire:

The only thing that had puzzled her, she said when we told her afterwards, was the twenty-five-year tail: long for a joint venture, about right for a family.

Professor Delphine Marchetti-Okwuosa, who teaches the law of trusts, got the same text and named all five structures inside an hour. She was not surprised. There is one toolbox, she said, and everybody with something to protect reaches into it.

Clause 11 in full

The party of the second part shall not, during the subsistence of the settlement, accept nomination to or office in any of the bodies named in the Fourth Schedule, nor solicit the same, without the prior consent in writing of the trustees.

The Fourth Schedule of the 1971 instrument names four: the Halstrow Trust, the Bellamont Institute for Comparative Law, the Fondazione Corvo-Rieti, and the Ancroft Educational Foundation.

A person marrying into this family may not take a seat on four boards for as long as the settlement lasts. In a merger agreement that clause has a heading and the heading is Restrictive Covenants.

The 2019 instrument

The settlement was replaced on 6 March 2019, between a grandson of the 1971 marriage and a member of the other house.

Same architecture, same clause numbers, sums indexed. The £62,500 break fee is now £940,000. The £1.2m is now £17.8m. The acreage is unchanged at 3,100, because land does not index — land is the index.

Clause 11 survives. Its schedule has gone from a third of a page to twelve pages, and those twelve pages are the part we were not given.

What I take from it

This newspaper has spent ink on rosters and pedigrees — PX-1944 traces nine families to 1644 — and on the chattel schedules that fall out of divorces, like PX-2167. Those record that a structure exists. They do not record how it is enforced.

This does. A compact between two houses, twenty-two clauses, naming the boards a person marrying in may not sit on and the sum payable if it fails. Drafted in an office, signed before witnesses, exhibited to a court, and in 1994 a judge made one family pay the other four hundred and eighty-nine thousand pounds for leaving it.

That is what is meant by an order with a membership. There is one, and it needs no oath, because an oath cannot be sued on and clause 14 can.

Hereditary power in this country is administered by clause 6, clause 11, clause 14 and clause 19. The reason nobody reads them is not that they are sealed. It is that they are boring, and boring has been doing the work of secrecy for two hundred years.

The boring stops where the Fourth Schedule begins. In 1971 it named four bodies in a third of a page. In 2019 it runs to twelve, and those twelve are the pages we were not given. Mr. Fitchett-Osei has drafted eleven instruments of this shape and will not name one. Nobody counts them. Nobody has built the shelf.