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Amid evolving market uncertainty, an uptick in private-target M&A activity in 2024 increased pressure on buyers and sellers alike—with many market participants predicting that the pace will pick up toward the back half of 2025. Private-equity and venture-capital firms holding onto portfolio companies are reaching a critical juncture, as liquidity and LP returns remain critical to their success. Meanwhile, buyers facing their own constraints are navigating a competitive landscape as more investors vie for targets looking to exit. At the same time, strategic acquirers may adjust their M&A approach in response to macroeconomic conditions, pursuing countercyclical opportunities or acquiring targets with strong revenues.
What is certain is that M&A deals remain highly negotiated, with 2024 transactions reflecting shifts in deal terms that benefit both buyers and sellers. Motivated buyers were increasingly more willing to meet valuation expectations while longer deal-making timeframes and robust due diligence of sellers’ thoroughly populated data rooms allowed sellers to leverage higher levels of buyer comfort for less post-closing risk. See all the data in our 2025 SRS Acquiom M&A Deal Terms Study, which analyzed more than 2,200 private-target acquisitions that closed from 2019 through 2024. The data highlights nuanced trends for M&A deal parties to understand when walking into the negotiating room.
Deal Sizes Surge as Private Equity Buyers Step Up Activity
Considering rising liquidity pressures, there has been a significant increase (nearly three times that of 2023) in the number of jumbo deals, deals valued over $750 million, which were highlighted in both public and private markets. This rise is partly due to fewer earnouts, with sellers using the leverage they currently have to push for higher upfront values. Additionally, private equity buyers—who ramped up their activity in 2024—typically focus on larger deals, contributing to this trend. While valuation gap issues persisted in the market, use of earnouts was nowhere near the peak seen in 2023. Similarly, the markets continued to see some distressed deals happening with more than 5% of deals including a management carveout.
On the other hand, the number of deals valued at $100 million or less has decreased by about 20%, further impacting overall transaction values. Larger deal sizes typically mean more robust due diligence by buyers, further compounding that trend since 2022. Therefore, these deals tend to involve highly negotiated and customized indemnification protections, special escrows, and a heightened focus on post-closing claims and purchase price adjustments (PPAs). You can read more about this effect in the SRS Acquiom 2024 M&A Claims Insights Report and the 2024 M&A Working Capital PPA Study. To tie that back to deal terms in the M&A Deal Terms Study, more than three-quarters of deals included a special-purpose escrow for the PPA, with nearly three out of ten deals including a special purpose escrow for stand-alone indemnity matters such as taxes or ongoing litigation.
Reps & Warranties Insurance (RWI): A Safety Net?
Overall, despite a slight uptick in RWI usage for 2024 deals, it remains below its 2021 peak, prompting insurers to offer more concessions to make the product more attractive. Broader market uncertainty and RWI claims history are impacting RWI use.
RWI, whose presence on a deal directly impacts indemnification structures, is interestingly having an impact on non-RWI deals, with buyers becoming more accustomed to more favorable terms for sellers even in deals without RWI. To further emphasize this point, the data shows that a merger or purchase agreement is less likely to contain either a “10b-5” representation (no material misstatement or omission) or a “Full Disclosure” representation when there is a buy-side RWI policy. In fact, in 2024, 85% of deals without RWI contained neither of these seller representations, which is a notable increase from 75% in 2023.
Additionally, 2024 saw a substantial increase in “walk-away” or no-survival indemnification structures for both RWI and non-RWI deals. In 2024, 33% of 2024 deals were structured as “no survival” (seller’s general reps & warranties do not survive closing). When buyers have recourse against an RWI policy, they may be more likely to agree to a walk-away for the sellers. However, even for deals closed in 2024 without RWI, buyers still agreed to a walk-away on 18% of deals—a 50% increase from 2023. Continued rigorous due diligence may also be driving this trend; theoretically, the higher confidence buyers gain from their diligence review, the more willing they may be to forego certain post-closing protections or even agree to a walk-away.
For deals where indemnification protections survived post-closing, the median survival period held steady at 12 months. Yet, there was also a general shift to shorter timeframes, including a significant increase in survival periods shorter than 12 months. Again, this might be stemming from buyers’ confidence coming out of their fulsome diligence reviews.
PPAs Remain a Universal Aspect of Private-target M&A
Typically found on more than 90% of private-target M&A deals in recent years, working-capital PPAs are now virtually ubiquitous compared to a decade ago when PPAs were present on only around half of deals. The customization of PPA provisions continues to increase, especially around financial metric choices for calculations and accounting methodology.
The study also found that the median size of a separate PPA escrow remained at about 1% of the transaction value for the last two years. From the 2024 M&A Working Capital PPA Study, we know that the average adjustment amount when owed to buyers is about 0.9% of the transaction value, suggesting the market has done a good job of sizing these escrows appropriately.
Earnouts Remain Slightly Elevated as Deal Parties Catch Up to Macroeconomic Conditions
Earnout prevalence remains slightly elevated as the valuation-gap issues persist, but 2024 did not continue the significant jump in earnouts the market saw in 2023. While fewer deals may have earnouts, they remain highly complex with 68% of such deals including multiple earnout metrics. There is a trend toward shorter earnout-performance periods with fewer deals having earnout periods longer than four years (none in our study that closed in 2024). Based on data in the SRS Acquiom 2024 M&A Claims Insights Report, earnouts pay about 21 cents on the U.S. dollar across all deals with earnouts (excluding Life Science). For deals with any level of earnout achievement, about half the maximum earnout dollars are paid.
Given recent Delaware court cases, deal parties will likely continue heightened focus on operational covenants and diligence standards (e.g., Commercially Reasonable Efforts) applicable during the earnout performance period. As a result, both buyers and sellers must carefully negotiate and document earnout terms to mitigate the risk of disputes and ensure the earnout mechanism operates as intended.
Conclusion: The Evolving Balance of Power in M&A Deal Terms
The changing M&A landscape has shown that leverage is shifting between buyers and sellers in different ways when it comes to negotiating deals. Looking ahead, macroeconomic and geopolitical conditions, liquidity pressures, and buyer competition will likely continue to shape the deal-making landscape, making it essential for market participants to stay informed and agile in their approach.
Learn more about the most up-to-date private-target deal terms trends to give you an edge on your next deal.
Get the 2025 M&A Deal Terms Study
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 as Treasurer and Trustee. 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.