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.
- 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.
