Bass, Berry & Sims attorney Tatjana Paterno discussed key takeaways from the Private Target Deal Points Study, the preeminent study of mergers and acquisitions (M&A) transactions published by the American Bar Association’s (ABA) Market Trends Subcommittee of the Business Law Section’s M&A Committee. Tatjana currently serves as co-chair of the study along with Jessica Pearlman, a partner at K&L Gates.
As Tatjana and Jessica point out, “One noteworthy finding in the latest ABA Private Target Deal Points Study was that the use of earn-outs actually went down for the period covered by the study (from 27% in the prior period to 20%). This was surprising because in the early days of the pandemic, we heard predictions that earn-outs would be used more frequently to bridge the valuation gap. It seems those predictions did not really materialize. This could be because of the overall seller’s market that we experienced in the latter part of the covered period; sellers may have had the leverage to get buyers to pay the entire purchase price upfront and avoid earn-outs.”
The attorneys also note the Private Target Deal Points Study looks at the trends around cybersecurity representations, representations and warranties insurance, and termination fees.
The ABA’s M&A Committee has partnered with Practical Law’s Corporate and M&A service to make data available from the Private Target Deal Points Study. According to Tatjana, this access will be “very beneficial because it puts that material in context and makes it easy to understand market practice for various acquisition agreement provisions. My hope is that more practitioners will become aware of the ABA Private Target Deal Points Study and use it for the benefit of their clients.”
The full article, “M&A Market Trends in Focus,” was published by Reuters Practical Law The Journal on August 1 and is available online (subscription required). To read more about the Private Target Deal Points Study, click here.