This infographic reveals key findings from RWI deal terms related to Purchase Price Adjustments, “10b-5” and “Full Disclosure” Reps, and Buyer Power Ratio. The data is from the 2019 Buy-Side Representations and Warranties Insurance (RWI) Deal Terms Study, powered by SRS Acquiom MarketStandard®, a proprietary database of over 1,800 private-target M&A deals. This study analyzes 642 private-target acquisitions ($121 billion) that closed from 2016 through 2018 in which SRS Acquiom provided professional and financial services.

  1. Effect on Financial Terms
  • Most deals that use Buy-Side RWI and incorporate a purchase price adjustment (PPA) use a separate PPA escrow to secure the PPA funds.
  • Deals that do not use Buy-Side RWI are also increasingly using a separate PPA escrow.
  • A separate PPA escrow is the most highly correlated categorical attribute associated with Buy-Side RWI.

2. Effect on Representations and Warranties

  • Over 90% of deals with Buy-Side RWI omit 10b-5 and full disclosure wording as Sellers attempt to match their liability under the purchase agreement’s reps & warranties section to the scope of the RWI policy.

3. Correlation to Deal Characteristics

  • For deals involving publicly traded buyers, Buyer Power Ratio (“BPR”) is the greatest indicator of whether or not Buy-Side RWI is used.
  • Deals involving public buyers and involving Buy-Side RWI correlate with very low BPR values.
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