Hell or High Water Covenant
A hell or high water covenant is an M&A regulatory-efforts provision requiring a party—usually the buyer—to take very broad or all necessary actions to obtain required regulatory approval, potentially including divestitures, behavioral remedies or other burdens specified by the agreement.
The covenant allocates regulatory remedy risk
Once a transaction is signed, regulators may require asset sales, licensing, behavioral restrictions or litigation before clearance.
A strong hell-or-high-water covenant pushes more of that risk to the buyer by requiring extensive action to achieve approval rather than permitting the buyer to abandon the deal when remedies become expensive.
The phrase is shorthand, not a statutory standard
Two agreements can both be described as hell-or-high-water while imposing different obligations.
One can require any divestiture necessary. Another can exclude specified crown-jewel assets or cap the revenue, EBITDA or value of businesses that must be sold. The operative clause matters more than the deal-team label.
Reasonable best efforts is generally a different risk allocation
Current 2026 deal histories show parties negotiating directly over whether to use a hell-or-high-water standard or a reasonable-best-efforts covenant with a burdensome-condition limitation.
That negotiation reveals the economic point: how much value destruction must the buyer accept before regulatory failure becomes a permissible reason not to close?
The covenant interacts with the reverse termination fee
A buyer that refuses an unlimited divestiture obligation may agree to a larger reverse termination fee if required approval is not obtained.
The fee compensates the seller for some failed-deal risk, while the efforts covenant governs what the buyer must do before failure is accepted.
The covenant can affect the value of the business being acquired
A buyer may be willing to pay a high price for a target as currently configured but not if approval requires selling a major product line, customer base or strategic asset.
A broad hell-or-high-water obligation can force the buyer to accept remedies that reduce the value of the combined company. A negotiated cap or burdensome-condition exception protects against that outcome but shifts more failed-deal risk back to the seller.
The covenant therefore links regulatory strategy directly to valuation. It is not merely a promise to file papers promptly.
Common mistakes
Treating the phrase as identical across deals The actual drafting controls.
Assuming it guarantees approval Regulators remain independent decision-makers.
Ignoring divestiture limits A covenant can contain negotiated ceilings that substantially narrow the obligation.
Example
A seller proposes that the buyer must agree to any divestitures required for antitrust clearance. The buyer rejects that hell-or-high-water standard and instead agrees to reasonable best efforts subject to a defined limit on divestitures. Regulatory risk shifts materially between the two drafts.
Example
A seller proposes that the buyer must agree to any divestitures required for antitrust clearance. The buyer rejects that hell-or-high-water standard and instead agrees to reasonable best efforts subject to a defined limit on divestitures. Regulatory risk shifts materially between the two drafts.
Professional note
Never rely on the label alone. The decisive question is which remedies, divestitures, litigation obligations, timing commitments and economic burdens the covenant actually requires.
Related terms
- Reverse Termination Fee
A reverse termination fee is a contractual payment that a buyer or parent may owe the seller or target if an acquisition agreement is terminated under specified circumstances defined in the agreement.
- Closing Condition
A closing condition is a requirement specified in an acquisition agreement that must be satisfied or, when legally permitted, waived before a party becomes obligated to complete the transaction.
- Regulatory Approval
Regulatory approval in M&A refers to governmental clearances, consents, waiting-period expirations or other regulatory actions required before a transaction may lawfully close under applicable antitrust, foreign-investment, industry-licensing or other laws.
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