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According to the American Lawyer Daily, lawyers at Wachtell, Lipton, Rosen & Katz "were saying very different things to their client and to federal regulators" last December. In other words, they were representing their client. Wachtell advised the bank last December that it had only a slim chance of being able to walk from the deal based on a material adverse change at Merrill but argued the opposite to regulators. None of this should be surprising. As Wachtell partner Eric Roth noted in a memo to BofA, Delaware law governed its merger agreement with Merrill, and no Delaware court has allowed a potential buyer to walk from a deal based on a MAC. Roth has had significant experience with the issue. He was part of the trial team that represented IBP Inc. in a 2001 case where Delaware Vice Chancellor Leo E. Strine Jr. rejected a claim by Tyson Foods Inc. (NYSE:TYS) that IBP had suffered a MAC and forced Tyson to complete the purchase of IBP. That case remains the most important one on MACs in Delaware. Roth revisited the issue in 2006 when he represented Advo Inc. in a MAC suit brought by merger partner Valassis Communications Inc. (NYSE:VCI), which sought to walk from the deal. The parties settled the case in the middle of a trial before Strine and completed their merger. And Roth certainly knew that the Delaware Court of Chancery had avoided involving itself in J.P. Morgan Chase & Co.'s (NYSE:JPM) purchase of Bear Stearns Cos. Inc. In a 2008 opinion, Vice Chancellor Donald Parsons, Jr., all but said that he was not going to cross the secretary of the Treasury and the chairman of the Federal Reserve when they claimed the deal was necessary to avoid a crisis in the financial markets. For reasons of both precedent and politics, Delaware simply wasn't going to involve itself in the sale of Merrill. AmLaw goes on to say that Roth argued to federal regulators last December that Merrill had in fact suffered a MAC. The government claimed that was not the case, but after the deal closed, it infused another $20 billion in bailout funds into BofA. This is what lawyers do: advise their clients about the strength of an argument, then argue its merits forcefully to a court, a regulator, or an opposing party in a negotiation. More important than the December MAC discussion is what then-BofA CEO Ken Lewis understood about the issue when he agreed to buy Merrill in September 2008. Generally, lawyers tell their clients that it's extremely difficult to walk from a merger agreement once it's been signed. That would have been especially true here, since Lewis had not only Merrill as a counterparty but then-Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke. David Marcus is senior writer responsible for The Deal magazine's Safe Harbor column.
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The most important questions in the saga of Bank of America Corp.'s (NYSE:BAC) purchase of Merrill Lynch & Co. Inc. remain unanswered despite recent revelations about the deal. 
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