I've blogged about the value of the Deal Points Study before here. In fact, that has been one of my most popular blog posts based upon number of pageviews.
The 2013 Private Target M&A Deal Points Study reviewed 136 publicly available purchase agreements for acquisitions of private companies by public companies completed in 2012. The transaction sizes in the study ranged from $17 million to $4.7 billion, with an average transaction size of $305 million and a median transaction size of $150 million. The study analyzed a few dozen frequently negotiated deal points with a goal of being able to provide some guidance on "what's market."
For example, a few of the study findings are as follows:
- 64% of the purchase agreements in the study included a representation from the target company similar to the SEC's Rule 10b-5, such as: "No representation or warranty or other statement made by [Target] in this Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the certificates delivered pursuant to this Agreement, or otherwise in connection with the Contemplated Transactions contains any untrue statement of material fact or omits to state a material fact necessary to make the statements in this Agreement or therein, in light of the circumstances in which they were made, not misleading." That is up dramatically from 32% in the 2008 Deal Points Study.
- 19% of the purchase agreements in the study required a legal opinion from target's counsel. That's down from the 58% of the deals in 2008 that included such a requirement.
- 83% of the purchase agreements in the study provided that the representations and warranties would survive the closing for a period of between 12 and 18 months. The most popular survival period length was 18 months (44%).
- 89% of the purchase agreements included caps on indemnification obligations. Of those agreements with caps, 89% of those agreements included caps at or below 15% of the purchase price.