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2023 M&A Deal Terms Study

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The 2023 SRS Acquiom M&A Deal Terms Study presents an analysis of more than 2,100 private-target M&A industry acquisitions valued at more than $460 billion that closed between 2017 and 2022 including more than 400 deals that closed in 2022 where SRS Acquiom provided services. The vast majority of these M&A deals are not required to be publicly reported.

M&A industry topics in this year’s study include:

  • Latest impacts from shifting deal trends, historic interest rate increases, inflation, and other market challenges
  • Comparisons of deals based on industries and whether buy-side Representations and Warranties Insurance (RWI) is included
  • New data points and analysis on deal structures, representations and warranties, and indemnification terms

Key findings in this year’s study include:

  • Nearly every M&A deal has a PPA, 73% of which have a separate PPA escrow
  • Earnouts are showing longer performance periods (24 mos.)
  • Median escrow sizes are holding steady at 10% across all deals

Listen to our experts discuss key highlights from the study in our videos below:

 

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Fewer No Survival Deals Are Using Reps & Warranties Insurance (RWI)

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Michelle Kirkpatrick
Executive Director, Shareholder Advisory

00:00:00
The 2023 SRS Acquiom Deal Terms Study shows fewer no survival or walk away deals that don't use rep and warranty insurance. But even on walk away deals or deals with rep and warranty Insurance, the sellers can still be on the hook for quite a few things post-closing. In fact, some of our most significant post-closing challenges have been on deals just like this.

00:00:27
One third of deals are now using special escrows for things like Tax Matters or even employee misclassification. Special escrows can be a great way for buyers to schedule their releases around their anticipated liabilities while also ensuring sellers receive most of their deal consideration within a reasonable time.

Holding Steady in Most Deals: Use of Special Escrows

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Kip Wallen
Senior Director, Thought Leadership

0:00:00
The 2023 SRS Acquiom Deal Terms Study shows that most deal parties continue to utilize indemnification escrows.

In fact 93% of deals that closed in 2022 included at least one escrow or hold back and over half had two or more.

We often get asked about escrow trends including sizes, and what the data shows is that when you aggregate escrow amounts on private m&a deals, the median is holding steady at 10% of transaction value, and even deals that use reps and warranties insurance that median figure is two and a half percent of the transaction value, which could be five times the amount that deal parties might expect.

Customized Accounting Approaches for PPAs: An Emerging Trend

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Karyn Kesselring
Associate Director

00:00:00
In our 2023 SRS Acquiom Deal Terms Study we found that purchase price adjustments are nearly universal on deals. In fact, 94% of transactions included these PPAs which are also sometimes referred to as working capital adjustments.

Not only are parties training more towards using these PPAs as a separate mechanism, but also in customizing the terms of the PPA to be more suited for the deal at hand.

00:00:32
The parties may want to consider developing a calculation worksheet which lays out a custom accounting approach for use in the adjustments, and this is just one of the many new points that we're tracking.

Kip Wallen

Senior Director, Thought Leadership tel:720-452-5364

Kip Wallen is a senior director leading the SRS Acquiom thought leadership practice. He leverages his extensive expertise and SRS Acquiom proprietary data to produce resourceful content regularly utilized by market practitioners. Kip has broad experience in M&A and provides guidance on market standards and trends.

Previously, Kip was a Director with the SRS Acquiom Transactional Group, where he collaborated with clients and counsel to negotiate M&A documents including purchase, escrow, payments, and other transactional agreements. Before joining SRS Acquiom, Kip was an attorney with a Denver-based boutique business law firm where he assisted clients with M&A transactions as well as general corporate governance and securities matters.

Kip is an avid supporter of the Colorado Symphony, serving on the Associate Board and Colorado Symphony Fund Board, and the Colorado Rockies. He is an active participant on the American Bar Association’s M&A Committee. In 2016, Kip completed Leadership 20 with the Denver chapter of the Association for Corporate Growth.

Kip received his J.D. from the Sturm College of Law at the University of Denver and an M.S. in Economics, B.S. in Economics and B.A. in International Relations from Lehigh University. He is a member of the Colorado bar.

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