(March 29, 2022) — Seyfarth has published the 8th edition of its Middle Market M&A SurveyBook (the “Survey”) which analyzes key transaction terms from more than 175 middle market private target acquisition agreements signed in 2020 and 2021.
The Survey focuses on key deal terms, including those comprising the “indemnity package” included in almost all private target acquisition agreements to address a seller’s potential post-closing liability to a buyer and to set the parameters of a buyer’s ability to claw back purchase price from a seller. Given the continued growth in the use of representation and warranty (“R&W”) insurance in private middle market M&A transactions, the Survey continues to track data from deals that included R&W insurance separately from deals where no R&W insurance was utilized. Key highlights include:
- Approximately 59% of the transactions reviewed for the 2022 Survey included R&W insurance, showing the continued high utilization of this product in middle market M&A transactions.
- The 2022 Survey demonstrated the continued trend and growth of “no survival” private target acquisitions, in which, similar to public company M&A transactions, the representations and warranties of the seller terminate at closing.
- The 2022 Survey also showed the continued trend of decreased use of an indemnity escrow.
Again this year, the Survey puts a spotlight on the use of “fraud” exceptions to certain limitations on buyers’ indemnification rights and remedies in private target acquisition agreements and whether and how “fraud” was defined in those agreements.
Although the COVID-19 pandemic severely contracted M&A deal making during the initial months of Spring 2020, US M&A activity quickly recovered to pre-pandemic levels with respect to both volume and value by July 2020 and continued to be extremely strong throughout 2021, bringing 2021 to the highest level of M&A deal activity in modern history. According to the Survey’s authors, while there is every indication that 2022 will continue to be a strong year for middle market M&A activity, most M&A professionals are not expecting the same record-breaking levels as 2021. The reasons for the continued positive outlook for 2022 include deal flow quality and quantity and the continued high amount of uninvested capital or “dry powder” available for deal making.
To view Seyfarth’s 2022 Middle Market M&A SurveyBook, please visit here.
With more than 900 lawyers across 17 offices, Seyfarth Shaw LLP provides advisory, litigation, and transactional legal services to clients worldwide.