Mars Inc., with its focus on the long term, is the antithesis of a private equity firm. Founded by Frank Mars in Minneapolis in 1920, the McLean, Va., confectionary company is still owned by his descendents, and makes candies whose names have long since become American icons: Mars, Milky Way, Snickers, M&M's. But when Mars approached chewing gum manufacturer Wm. Wrigley Jr. Co. about a combination last year, it demanded the same kind of merger agreement as might have been expected from a PE shop -- one that granted the buyer the right to walk from the deal for any reason.

Mars got that right in the agreement the parties announced April 28, and as financing markets worsened in the intervening year, the deal has become a model for others in which an industry player has agreed to buy a rival.

For many years, PE firms demanded the right to walk from a deal if the financing fell through. As the buyout shops started acquiring large public companies in the middle of this decade, they were able to preserve that right upon agreeing to pay a so-called reverse termination fee.

Sellers often trumpeted that their deals were not subject to financing, a claim that turned out to be very wrong.

As the debt markets started to sour in summer 2007, the risks to the seller of such a structure became obvious. In August of that year, Bain Capital LLC, Carlyle Group and Clayton, Dubilier & Rice Inc. used their right to walk from the $10.3 billion purchase of HD Supply to extract a $1.8 billion price cut on the unit from its owner, Home Depot Inc.

A host of PE shops used the right thereafter. Some walked from a deal upon payment of the reverse termination fee, as Cerberus Capital Management LP did in paying $100 million to escape its agreement to buy United Rentals Inc.

Because the reverse breakup fee functioned as a cap on damages, other PE shops pressured targets to accept even more modest settlements rather than endure litigation, as Kohlberg Kravis Roberts & Co. did in walking from an $8 billion agreement to buy Harman International Industries Inc.

Mars global president Paul Michaels and CFO Olivier Goudet would have known this history when they contacted Wrigley chairman William Wrigley Jr. about a possible combination on April 1. Mars had also more direct experience with the way private equity firms buy companies; in 2006, it sold its MEI Conlux unit, a maker of devices used in vending machines that take bills and coins and verify the amount, to Advantage Partners and Bain Capital for a reported $500 million. The parties didn't disclose the terms or release the merger agreement, but in such deals the private equity shop would typically receive a financing out.

Michaels and Goudet offered $76 per share for Chicago-based Wrigley when they met with the chairman, a descendent of the company's founder, on April 11. Mars said it would only agree to the acquisition if the target assented to a merger agreement that allowed Mars to walk for any reason on payment of a reverse breakup fee and explicitly barred specific performance. In addition, Mars also promised to keep Wrigley as a standalone subsidiary, which would allow Mars to put some of the debt incurred in the deal on Wrigley's balance sheet rather than its own.

"The proposed structure had not been used in a strategic deal but had been used in PE deals, so the precedents were more on the PE side," says John Finley, a partner at Simpson Thacher & Bartlett LLP in New York who led the legal team that represented Mars.

The deal came together quickly after Finley served up a draft merger agreement to Wrigley's lead lawyer, William Kunkel at Skadden, Arps, Slate, Meagher & Flom LLP, on April 17.

Mars raised its bid to $80 a share but held firm on the contractual conditionality. William Wrigley himself negotiated the reverse termination fee of $1 billion that Mars would owe if it walked.

The buyer also lined up the financing it would need for the $23 billion purchase. Mars' banker, J.P. Morgan Chase & Co., agreed to furnish $11 billion in debt that would stay with the parent. Goldman, Sachs & Co., which advised Wrigley, provided a $5.7 billion senior debt facility that would go on Wrigley's balance sheet after closing.

And Warren Buffett's Berkshire Hathaway Inc. would buy $4.4 billion of subordinated Wrigley's debt and $2.1 billion in Wrigley stock. The financing sources helped to reassure Wrigley's board, Kunkel says. "To be able to bring together two strong financial institutions and Warren Buffett helped to create a willingness on the part of the Wrigley board to accept a transaction without specific performance."

But, he adds, "to have a $1 billion reverse termination fee, which in this situation would have come out of the Mars family's pocket, was another feature that helped people to be willing to do something that was unprecedented."

Not least on the board's mind was the generous premium. At $80 per share, Mars was offering 28% more than Wrigley's closing price on April 25, the last trading day before the transaction was announced.

The deal closed 5-1/2 months later, on Oct. 6.

Goldman and J.P. Morgan were able to syndicate the debt in August and early September, before the credit markets collapsed after Lehman Brothers Holdings Inc. filed for bankruptcy.

Other strategic buyers soon emulated Mars, though none got as broad a walk right. Ashland Inc. agreed to buy Hercules Inc. for $3.3 billion on July 10 under a merger agreement that allowed Ashland to walk upon payment of a reverse breakup fee if the financing on the deal failed, but otherwise allowed Hercules to sue for specific performance.

The Ashland acquisition of Hercules closed on its original terms, but Brocade Communications Systems Inc. used a similar right to extract a $500 million price cut from Foundry Networks Inc. That deal was announced July 21 and closed Dec. 19.

And JDA Software Group Inc. walked from its $613 million agreement to buy supply chain software company i2 Technologies Inc. upon payment of a $20 million reverse breakup fee.

The largest strategic deal in which the buyer has such an out is Pfizer Inc.'s $68 billion agreement to purchase Wyeth, announced Jan. 26. And with the financing markets still deeply troubled, there's no end in sight to the trend Mars began in buying Wrigley.