The $9 billion-plus agreement by 3G Capital to buy Skechers wasn’t just a surprise — it was something of a dealmaking miracle, empowered by a contract designed to keep both sides comfortable in a time of economic chaos.  

Most bankers and big-time corporate buyers have been decidedly on the sidelines, waiting for the market to find its footing in President Trump’s trade war. The dramatic spike in costs from new tariffs — 145 percent on Chinese-made goods and 10 percent on most of the rest of the world — has more than one deal veteran scratching their head over just how to price a company these days. 

Despite that, 3G and Skechers pushed ahead, crafting what is perhaps the biggest footwear deal ever. And the Brazilian private equity company is paying $63 a share, a healthy 30 percent premium.  

To get there, buyer and seller crafted a contract that was designed to go through trade war or no, while also providing for some big termination fees if things go sideways. 

The contract, for instance, is careful it what it defines as a “material adverse effect” — or some change dramatic enough to disrupt the deal. 

LVMH Moët Hennessy Louis Vuitton famously used the material adverse effect clause in its agreement to buy Tiffany & Co. to try to nix the deal during the pandemic, but ultimately settling for a price reduction.

Private equity firm 3G is also buying Skechers in a turbulent time, but their contract carves out most of the turmoil, specifically citing “changes in trade regulations, such as the imposition of new or increased trade restrictions…or any consequences resulting from any ‘trade war.’”

If the deal were to go sideways under certain conditions, 3G would have to pay Skechers a termination fee of $534 million. And if the shoe were on the other foot and Skechers ultimately sells to someone else, the company would have to pay a $340 million fee to its jilted private equity suitor. 

“This is a deal designed to close, to keep all the parties interested, that’s fair and balanced all the way around,” said Jonathan Lazarow, a fashion attorney who specializes in mergers and acquisitions. 

“There are elements in this deal that I think are really pro buyer and there are elements of this deal that are pro seller,” he said. “It’s a good, fair deal for all the parties. A good deal is when everybody feels like they could have gotten a better deal.”

Lazarow took the agreement as a sign of confidence from the market despite the trade war.

“Obviously, 3G wanted the deal and they looked at it and said, ‘OK, we can still make this one work even with the tariffs,’” he said. “Reading between the lines, they see real value in the Skechers brand and where it’s situated within the market as opposed to whether or not there’s a consumer confidence issue because consumers might cut back [due to tariffs].

“It’s saying that deals are still getting done,” he said. “For good businesses we’re seeing that sophisticated buyers and sophisticated sellers are able to compromise to get people comfortable that the deal is a good deal.”