A new SRS|Acquiom study takes a deep dive into its proprietary database to determine trends in 2014 M&A Terms and Conditions for privately-owned companies. The report reveals that dealmaking is becoming less legally contentious, management carveouts are increasing, and while the time to exit remains steady at eight years, the cost of getting there is on the decline.
In other words amount of capital required to become an attractive M&A target is declining. The information and data comes from a new 2014 SRS|Acquiom M&A Deal Terms study. The report analyzes nearly 500 transactions valued at USD 79 billion from 2010 through 2013 and provides deal parties with trends and insights into M&A deal terms.
- Stock deals increased: though cash is still king, deals involving buyers’ stock rose to 21%, up from 15% in 2012—a number that had remained steady since 2010.
- Leaner capital: median equity capital invested fell to USD 23 million in 2013 from USD 28 million in 2012, while the median time from founding to exit remained steady at 8 years.
- Management carveouts increasing: 89% of deals in which the transaction value did not exceed amounts invested had a management carveout. Overall, deals with carveouts climbed to 22% in 2013 from 19% in 2012.
- Conflict waivers doubled: waivers allowing Seller’s counsel to represent the selling shareholders post-closing in matters related to the acquisition nearly doubled to 40% in 2013, from 22% in 2012.
- Employee retention holdbacks increased: holdbacks contingent on employees’ continued employment with Buyer rose dramatically year over year and were the second-most common use of special escrows in 2013, but overall remain uncommon—only 8% of deals in 2013 included retention holdbacks.
- Fewer Legal Opinions required: deals requiring a legal opinion (non-tax) from Seller’s counsel have declined by nearly half since 2011 to 38%.