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).
- 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.