In this claims insights infographic, you will learn about key findings related to purchase price adjustments and indemnification claims activity across private-target deals, on which SRS Acquiom served as shareholder representative from 2014-Q2 2018.

 

2018 Claims Insight Report Key Points:

Post-closing purchase price adjustments (PPAs)

  • 74% of deals with a PPA mechanism had an adjustment, and 42% of deals with a PPA mechanism had a buyer-favorable claim for adjustment.

Claim activity was significant in deals with claims

  • 42% of expired-escrow deals* with at least one claim had claims totaling at least $1MM.
  • Fraud claims are by far the largest, and the only claim category for which the median claim size exceeds the escrow (127%). Other claim categories may exceed the escrow in some instances—often because they are alleged in conjunction with fraud—but the median is much lower.
  • The frequency of claims increases with transaction value.
  • Regulatory claims take the longest to resolve (13-months median), whereas capitalization and fraud claims tend to resolve quickly (1-month median).

Expense Funds

  • The average expense fund exceeds $250,000 for deals without earnouts and $350,000 for deals with earnouts**.

* “Expired-escrow deals” includes deals where selling shareholders have no further escrow-based indemnification obligations.

** For a detailed analysis of SRS Acquiom’s life sciences deals, including earnouts, please see the 2017 SRS Acquiom Life Sciences M&A Study.

Related Stories