Published biennially, the American Bar Association’s Private Target Deal Points Study summarizes key deal points found in publicly-available acquisition agreements involving the acquisition of a privately-held target by a publicly-held buyer.
Based on advance receipt of the 2015 Private Target Deal Points Study, the Hirschler Fleischer M&A Practice Group has identified and is now able to share some initial trends in survey data. Notably, the study, which draws on 2014 closing data from 117 middle market transactions, reveals:
- The percentage of transactions without an indemnification escrow or holdback doubled over the preceding (2013) study.
- Despite an increase in the number of deals without indemnification escrows or holdbacks, the average size of indemnification escrows and holdbacks increased by approximately 150 basis points (or 1.5% of transaction value).
- The use of “deductible” indemnification baskets (as opposed to “first dollar” baskets) continued its upward trend, as did the average size of the baskets.
- The average size of indemnification caps decreased by approximately 300 basis points (or 3% of transaction value).
- The inclusion of so-called “materiality scrape” provisions increased by 250% over the prior (2013) study.
- Earnouts remained present in approximately 25% of reported deals; however, covenants regarding achievement of the earnout are trending more favorably to buyers.
- 17% of the reported transactions were structured as asset deals (as opposed to mergers or straight equity sales), up from 10% in the previous study.
- 18 months remained the most common survival period for non-fundamental representations and warranties.
As with the 2013 study, the Hirschler Fleischer M&A Practice Group will be preparing a brief summary of the highlights of the 2015 Private Target Deal Points Study. To schedule a brief presentation of these highlights, please contact Andrew Lohmann, Rod Simmons or Lisa Hedrick.